Do I Need My Newborn Babys Social Security Number and Birth Certificateto Her on My Taxes

I was a Registered Tax Return Preparer (RTRP) and a partner in 3 national brand tax preparation stores in Pennsylvania for over 10 years.

By Social Security Administration [Public domain], via Wikimedia Commons

Retires Can Really Take to Pay Income Tax on Social Security Benefits

As a revenue enhancement preparer, I have had more than ane taxpayer express surprise (outrage?) over the fact that their social security income would actually be taxable. A married couple, both over age 62 and collecting social security benefits, who, in addition to some involvement income and a pocket-size alimony, continued to both work part-time. Despite having tax taken out of their paychecks and the pension, with the inclusion of part of their social security benefit as taxable income, they owed over $chiliad!

Most retired people believe that their social security do good is revenue enhancement-free. For the nearly part, and for many retirees, this is true, peculiarly when social security is their just source of income. These retirees may not even have to file a tax return. Supplemental security income payments (SSI) are not taxable.

Just, add a pension or an IRA distribution, combine it with some taxable or fifty-fifty tax-costless interest, and mix in some dividends, capital gains, or earned income; then, depending on your filing condition, your social security benefit may become taxable.

The amount of your social security benefit that is taxable depends on your total income and filing status. Upward to 85% of your social security do good may exist included every bit taxable income on your income tax render. Non only may information technology exist taxable, it could even push you into a higher taxation bracket!

To Estimate if Some of Your Social Security Benefit May Exist Taxable:

1. Add together together all of your income, including earned income, distributions from pensions, 401(k)s, IRAs, taxable and tax-exempt interest, dividends, capital gains, and also include items ordinarily excluded from income such as interest on savings bonds or foreign earned income.

two. To the total from #one, add 1/ii of the full social security do good you (and your spouse if filing jointly) received (every bit reported on a course SSA-1099). This is your "combined income."

3. If you file as an individual and your combined income is

a. betwixt $25,000 and $34,000: You may owe federal income tax on up to l% of your benefit.

b. over $34,000: Up to 85% of your benefit may be taxable.

4. If y'all file MFJ (married filing jointly) and your combined income with your spouse is

a. between $32,000 and $44,000: Up to fifty% of your benefit may be taxable.

b. Over $44,000: Up to 85% of your benefit may exist taxable.

Save Yourself a Tax Bill at Taxation Time

If you owe tax on a portion of your social security benefit, you can relieve yourself a tax beak at tax time. In addition to having tax withheld from your paycheck, alimony or IRA distribution, yous can have taxation withheld from your social security benefit. Consummate a Grade Westward-4V Voluntary Withholding Request and file information technology with the Social Security Administration.

For more than information, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

Taxation diversification tin reduce your taxation liability in retirement and potentially decrease the portion of your social security benefit subject to income tax.

This article is accurate and truthful to the all-time of the author's knowledge. Content is for informational or entertainment purposes just and does not substitute for personal counsel or professional person advice in business organization, fiscal, legal, or technical matters.

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© 2012 Mark Shulkosky

Mark Shulkosky (author) from Pennsylvania on February 03, 2013:

ib, I agree. Centre form wage earners can't get that rich because they accept to pay their taxes as they go along and can't take advantage of that many loop holes in the tax code. The real wealthy earn their wealth exterior the tax code (Gates, Ellison, Buffet, etc.). They have paper wealth that they command how they harvest information technology to control their taxation bills.

Talk again afterward the tax season.

Brad Masters from Southern California on Feb 03, 2013:

Banks Cottage

My signal was that the revenue enhancement even from the sale of stocks would brand it difficult to make a billion, even if your stock was worth a billion.

As for those with stock that became billionaires, Bill Gates and his partner, Paul Allen, Larry Ellison of Oracle.

In improver, many billionaires are asset billionaires and not liquid billionaires, and so they don't pay taxes until they exercise their assets.

My ultimate question is with the current federal tax arrangement how tin can any wage earner go rich, without utilizing the many loopholes of the IRC. The upper center class wage earner nigh likely is only a few steps from the wave of credit breaking over there head, rendering them in the red.

So at that place are those loophole billionaires that can buy several loftier price homes across the state, and the earth. They can afford individual yachts, private jets and rent unabridged floors of 5 star hotels.

The federal and state income taxes doesn't slow them down, but for the eye course wage earner it is like an ballast dragging them down.

Cheers

As yous said, it is tax flavor, my male parent in-law was a CPA and he did taxes into his early 80s, and died at 91. So I understand the tax crunch.

We tin can have more discussions in May.

Mark Shulkosky (writer) from Pennsylvania on February 03, 2013:

Hi Pamela, glad you found the information useful. Tax season is cranking up. Hope you lot and your family unit as well have a cracking new twelvemonth.

Mark Shulkosky (author) from Pennsylvania on Feb 03, 2013:

ib, I don't think it would be very easy for a person to become a billionaire past just investing in stock unless you owned enough of the stock to essentially ain the visitor. Basically, you start the visitor and therefore accept a lot of stock before it goes public and even then yet have a big share of information technology. The Walton family (Wal-Mart) are billionaires, only their family started the company.

I don't think many, if any, people could merely earn enough to go a billionaire, even with taking every possible advantage in the IRC. Al Gore may do information technology, but non by just earning money. If he does it, it will be by owning, investing, buying and selling businesses. He fabricated $100 million before capital gains taxes by selling his t.5. station. Phil Michelson may earn $60 million a year with golf and endorsements etc, but without investments, (stocks, businesses, golf courses, etc), I don't recollect he could practise it. Hedge fund managers, private bankers, basically the really big guys on Wall Street could do information technology, only the question becomes did they make this coin by earning it, by running a business, or past investing. Not that they don't piece of work, I don't recollect many of the states would think of them equally 'wage earners' (I make $50,000 per hour ????).

So, I think it would be very hard, if non impossible to earn your way to a billion dollars. And so, how could some one become a billionaire?

The 'easiest' way would be to invent or create something, go into business organization, accept information technology become public and take your buying stake (your stock) go very valuable or sell the business and brand a turn a profit on the sale.

In the industrial revolution, Carnegie, Westinghouse, etc. had businesses that made traditional products (steel, light bulbs, etc.). They fabricated a lot of money off of the backs and hard work of their workers. Michael Dell, Bill Gates, Steve Jobs, took ideas, technology and made their products bachelor and affordable to the masses, improved productivity and made a lot of coin forth the way. Now, Google, Facebook, etc., accept ideas, technology and services and their founders have made billions when their companies went public. Come with the next keen idea, bring information technology to market, make it successful and yous could become a billionaire.

There are likewise the riskier, illegal ways to get a billionaire (remember drug cartels). Probably not the easiest businesses to break into.

To some degree, yous could argue that it would be hard, if not impossible, to brand $1 billion without the aid of the efforts of other people (employees, stock in companies and their employees, etc.)

Finally, you could get a billionaire the erstwhile fashioned manner. Yous could inherit the money ;-)

Pamela Dapples from Arizona. on February 02, 2013:

Yous've sure given us a lot of good information hither, bankscottage. I'm glad I bumped into this hub considering I had a question in my mind about an aspect of this, just by coincidence.

I can imagine you're very busy correct at present during taxation season. Best wishes to y'all and your wife for a happy and peaceful jump (subsequently taxation time.)

Brad Masters from Southern California on February 02, 2013:

bankscottage

You got that right, and if it wasn't for the balmy weather this state would probably be a lot meliorate politically.

Another question,

Inquisitive minds want to know, well maybe just me.

Under the current tax system, both Federal and state, specially CA, how would anyone be able to go a billionaire.

For example, lets first loftier.

A CEO who gets a straight salary of ten million dollars a twelvemonth, and no bonus and no stock options.

With this contour, I can't encounter this person becoming a billionaire ever.

Now take ex president Nib Clinton with a alimony of $200,000 a yr, and book deals and spesking engagementsm, yet since he left office broke, he and Hillary have amassed a fortune of over 100 million dollars. Now he didn't exercise this feat with.out massaging the IRC

Now most of the billionaires did it throught the stock market, especially during the dot com bubble, but what are the chances of doing it without the stock market?

Anyway, I idea this question might be interesting to solve, or at least endeavour to solve.

Have a great weekend

Marker Shulkosky (author) from Pennsylvania on Feb 02, 2013:

Oh, oh ib. I alive in a flat tax country and you live in a fatty tax country ;-)

Brad Masters from Southern California on February 01, 2013:

bankscottage

Thanks for the reply.

I agree with the examples that you lot gave here, and I living in CA, I actually like the PA flat taxation.

Mark Shulkosky (author) from Pennsylvania on February 01, 2013:

ib, the IRC is so complicated because politicians pander to special interest groups of all income levels. Petty sections of the code utilize to certain taxpayers and nobody else for any number of reasons.

Certainly the highest income earners take the most resource to take reward of every nuance of the lawmaking.

For instance, very depression income people become earned income credits, boosted child tax credits, etc. I have taxpayers in my office that make $ix -15K and can get refunds of $6 to 9K if they accept 3 kids. I tin assure you that these taxpayers know the few, simply significant, rules that utilize to them and allow them to get significant refunds.

My feeling would exist that those in the eye have ways in the law to decrease their taxation liability, but for any number of reasons, they can't apply the "rules" gear up to their advantage. Didactics credits don't aid if you or your kid aren't in college. Educator expense credit only helps if you are a teacher. Deducting mortgage interest and existent estate taxes just if you ain a habitation (and the deductions exceed the standard deduction). No new solar panals, no energy credit. And on and on.

The Pennsylvania country income tax is a flat rate, three.07% regardless of your income or how you earn it. At that place is tax forgiveness for low income taxpayers and it depends on the taxpayer's income and number of dependents (these revenue enhancement payers get the revenue enhancement they paid refunded back to them). At the nowadays fourth dimension, social security and retirement income are not taxed in PA helping retirees. The only deductions allowed are for items necessary for you to do your job such as work boots, tools, professional license, continuing education, union dues, etc. It seems to exist a very simple and off-white system. Information technology is possible, Washington just has to have the will to do it.

Thanks for your comments and insight.

Brad Masters from Southern California on February 01, 2013:

bankscottage

I empathise the difficulty, I was interested specifically for the wage earner that works every bit aW2 for an employer.

This is the class of wage earners that accept lost about of their deductions because of the 1986 Tax Reform Human activity.

My point of asking the question was to try to quantify my stance that the bulk of the IRC is not usable by the average employed wage earner.

Of course when you are cocky employed, y'all get admission to Schedule C concern deductions. But at the same time you lot are really a one person business that has to pay FICA contributions equally an employer equally well as the employee.

My opinion is the the billionaires or the 1% people are not the simple wage earner, or even the self employed wage earner. While the marginal tax at loftier six figures and higher up is the highest, these revenue enhancement payers have hundreds, or fifty-fifty thousands of means to reduce, defer, and fifty-fifty eliminate their tax liability.

It is a product of their wealth and higher earnings that enable them to employ more of the IRC than the remainder of the people.

I don't think that it is an accident that the IRC is so complicated, this makes it difficult to follow and very expensive tax attorneys can ride that trail to save their clients plenty coin to make their expensive billing picayune in comparison to the tax liability reduction.

This is not an indictment, it is just an observation.

Thanks

Mark Shulkosky (writer) from Pennsylvania on February 01, 2013:

ib, I'g not sure that anyone can calculate what percent of the IRC is used past a specific wage earner or wage earners in general. The code is so complicated. Some wage earners apply certain parts that other wage earners wouldn't. For instance, the credit for Educator Expenses would only apply to teachers, while certain other areas apply more to truck drivers, etc. Publication 17 is the framework for individual tax payers and there are several supplimental publications for related forms. I wouldn't have whatsoever idea what percentage of the tax code applies to wage earners in general. This section of the code is for individual taxpayers. It includes all of the means you can earn your money, wages, self-employment, passive income, etc.

Brad Masters from Southern California on January 31, 2013:

bankscottage

Here is an interesting question.

What per centum of the IRC tin be used by a wage earner?

Total income is from wages, and employ the max SS as the top of the wages.

Thanks

Marker Shulkosky (author) from Pennsylvania on January 31, 2013:

ib, cheers for the annotate and suggestions. Everyone's taxes are unique just a few examples could be very helpful. That would as well atomic number 82 into some other Hub I have been meaning to write about taxation diversifying your portfolio. Thank you over again.

Brad Masters from Southern California on Jan 31, 2013:

Bankscottage

I would call back that some specific examples would make the SS taxation more clear.

Maybe three examples showing No Tax, Average Taxation, and Maximum Tax based on SS benefits.

Thanks

Sondra Rochelle from United states on January 26, 2013:

I knew that SS could be at least partially taxable, simply it'due south good that you explained information technology in this hub. When are people going to learn that at that place is no free lunch! Nicely washed and voted up!

Mark Shulkosky (writer) from Pennsylvania on April 09, 2012:

tamarawhilhite, thank you for stopping by and asking a question. While social security benefits may be taxable, supplemental security income (SSI) that a disabled person could receive are not taxable. SSI is administered through the Social Security Administration, so some times it is hard for people to tell them apart.

As far as what percentage of retired people pay tax on social security, that is a proficient question. I don't know if anyone keeps runway of that statistic. The clients in my taxation office tend to be lower income, and my relatives that are on social security do not have large pensions, so most or all of them do not pay taxes on social security. Since many retirees live almost exclusively on social security, my guess would be that the percentage is nigh likely less than xxx%. But, I am not sure. It does seem harsh that if you worked difficult, saved, and paid social security tax all of your working career, that you would be punished by having to pay taxes on a social security benefit you receive in retirement (when yous paid tax on the money you contributed).

Tamara Wilhite from Fort Worth, Texas on April 08, 2012:

What percentage of the retired or disabled pay income taxes on their Social Security benefits?

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