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Social Security benefits taxed with "other income" after age 70?

 
 
clackey
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      12-19-2003, 01:43 PM
I have heard for years about "unlimited Earnings" after age
70 meaning "no income tax" on Social Security benefits after
age 70.

Is this true?

Is 401K disbursement considered "earnings" in this definition?

I also read something about the "The Senior Citizens
Freedom to Work Act" making some changes.

I can't find anything in the formal IRS documents explaining
this. Can you point me to an IRS document covering this
issue?

The "trial version" of a tax program continues to tax my
Social Security Benefits when I add in the 1099R claiming my
401K disbursement. Is this an error, or a change or what?

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John H. Fisher
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      12-22-2003, 08:46 PM
clackey <(E-Mail Removed)> writes:

> I have heard for years about "unlimited Earnings" after age
> 70 meaning "no income tax" on Social Security benefits after
> age 70.
>
> Is this true?
>
> Is 401K disbursement considered "earnings" in this definition?
>
> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.
>
> I can't find anything in the formal IRS documents explaining
> this. Can you point me to an IRS document covering this
> issue?
>
> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement. Is this an error, or a change or what


Social Security is taxed based on income. Age has nothing to
do with it. President Clinton signed "The Senior Citizens
Freedom to Work Act" in 2000. The legislation:

Eliminates the Social Security retirement earnings test in
and after the month in which a person attains full
retirement age--currently age 65. Elimination of the
retirement test would be effective with respect to taxable
years ending after December 31, 1999.

In the calendar year the beneficiary attains the full
retirement age, permanently applies the earnings limit for
those at the full retirement age through age 69 ($17,000 in
2000, $25,000 in 2001 and $30,000 in 2002) and the
corresponding reduction rate ($1 for $3 offset) to all
months prior to attainment of the full retirement age. (In
applying the earnings test for this calendar year, only
earnings before the month of attainment of full retirement
age are considered.)

Permits, beginning with the month in which the beneficiary
reaches full retirement age and ending with the month prior
to attainment of age 70, the retired worker to earn a
delayed retirement credit for any month for which the
retired worker requests that benefits not be paid even
though he/she is already on the benefit rolls.

The House approved an earlier version of H.R. 5. The Senate
approved an amended version of the legislation on March 22,
2000. The House agreed to the Senate amendment to the
legislation and cleared the measure for transmission to the
President on March 28, 2000. For additional detail, see
Legislative Bulletins 106-16, 106-17, 106-18 and 106-19.

"Jack" - John H. Fisher - (E-Mail Removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Rich Carreiro
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      12-22-2003, 08:46 PM
clackey <(E-Mail Removed)> writes:

> I have heard for years about "unlimited Earnings" after age
> 70 meaning "no income tax" on Social Security benefits after
> age 70.


That's not what it means. It means that people who
were over 70 could have wage or business income
(i.e. "earned income") without it reducing the
size of your social security check.

> Is this true?


Not in the way you mean it.

> Is 401K disbursement considered "earnings" in this definition?


It is not considered earnings in the sense of computing
the size of your check. It *is* considered income in
the sense of how much of your check is included in
your taxable income, which is what I believe you're
talking about.

> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.


That lowered the age where you can have earned income
without having your check reduced.

> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement.


If half your SS benefits plus all your other income
(including 401(k) disbursements) are greater than a
threshold, it darned well better include a chunk of your SS
benefits as taxable income. See the tax form instructions
for the threshold and the worksheet if you want to see the
calculations yourself).

> Is this an error, or a change or what?


It is not an error and it's been this way for
many years.

--
Rich Carreiro (E-Mail Removed)

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Bill
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      12-22-2003, 08:46 PM
Clackey asked:

> I have heard for years about "unlimited
> Earnings" after age 70 meaning "no income
> tax" on Social Security benefits after age 70.
> Is this true?


No. The reference applies to the "penalty" for earned
income ($1 for each $2 earned) in earlier years.

> Is 401K disbursement considered "earnings"
> in this definition?


No. But it is consider part of Gross Income.

> I also read something about the "The Senior
> Citizens Freedom to Work Act" making some
> changes.
> I can't find anything in the formal IRS
> documents explaining this. Can you point me
> to an IRS document covering this issue?


IRS Pub 17, Chapter 12 deals with Social Security Benefits
and their taxation.

> The "trial version" of a tax program continues
> to tax my Social Security Benefits when I add
> in the 1099R claiming my 401K disbursement.
> Is this an error, or a change or what?


No. No error, and no change. Your total gross income --
including "tax-free" muni bond interest -- is used to
calculate the amount of federal income tax due on Social
Security payments.

Bill

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Arthur Kamlet
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      12-22-2003, 09:06 PM
clackey <(E-Mail Removed)> wrote:

> I have heard for years about "unlimited Earnings" after age
> 70 meaning "no income tax" on Social Security benefits after
> age 70.
>
> Is this true?


Nope.

Earnings past age 70 --acually the law has changed to age 65
--will not reduce the benefits paid to ypou by Social
security.

Earnings (e.g., wages, tips, net self employment) below this
age will be subject to a repayment of benefits to social
security at the rate of $1 for every $2 earned.

What you are asking is whether the social security benefits
are included as part of taxable income.

The answer is maybe some portion of your social n=benefits
are included in taxable income. If half your benfits plus
all other income including interest from tax exempt
municipal bonds is below a threshold for your filing status,
then none of the benefits are taxable, otherwise, use the
Social Security Benefits Worksheet in the Form 1040 or 1040A
instructions to calculate how much of the benefit is to be
included as taxable income.

The thresholds are:

Filing Status Threshold $

Single or HoH or QW 25,000
MFS (lived with spouse some time
during the year) 0
MFS (Lived apart from spouse all year) 25,000
MFJ 32,000

> Is 401K disbursement considered "earnings" in this definition?


No.

> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.


Lowered the age where you are not docked for having earned
income from 70 to 65.

> I can't find anything in the formal IRS documents explaining
> this. Can you point me to an IRS document covering this
> issue?


See the instructions for Line 20 in the Form 1040
Instruction booklet.

See the Social Security Admin Website www.ssa.gov for the
payback rules. Payback of beneifts is not administered by
the IRS.

> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement. Is this an error, or a change or what?


The 401k is part of your income that, when added to half of
your social security benefits, determine how much of your
beneift will be included in taxable income.

The 401k is not considered for the payback rule but is
considered for the calculation of taxble income rule.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

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A.G. Kalman
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      12-22-2003, 09:06 PM
clackey wrote:

> I have heard for years about "unlimited Earnings" after age
> 70 meaning "no income tax" on Social Security benefits after
> age 70.
>
> Is this true?


You are allowed to have unlimited earnings with no impact
on the amount of benefits received once you have reached
your full retirement age (FRA) as defined by the SSA.
E.g., those born in 1938 use age 65 plus two months.
You can find a table of ages at:
http://www.socialsecurity.gov/pubs/retirechart.htm.
There is a also a special rule that must be used in the
year you actually reach that age.
(President Reagan era bill.)

> Is 401K disbursement considered "earnings" in this definition?


No. Earnings is basically what you receive for work you
perform. E.g., wages, salary and self-employment income.

> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.


That's Public Law 106-182.
http://thomas.loc.gov/cgi-bin/query/z?c106:H.R.5.ENR:
It's the law that amended the rules that now allows
unlimited earnings after your FRA.
(President Clinton era bill.)

> I can't find anything in the formal IRS documents explaining
> this. Can you point me to an IRS document covering this
> issue?
>
> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement. Is this an error, or a change or what?


SSA benefits start to become taxable when the sum of all
your taxable gross income plus tax-exempt interest/dividends
and 1/2 of your SSA benefits exceeds a specific dollar value
for your filing status. E.g., the amount is $25,000 for a
taxpayer filing as single and $32,000 for a couple who file
jointly.

--

Alan
http://taxtopics.net

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Harlan Lunsford
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      12-22-2003, 09:45 PM
clackey wrote:

> I have heard for years about "unlimited Earnings" after age
> 70 meaning "no income tax" on Social Security benefits after
> age 70.
>
> Is this true?


Don't we wish it were! unlimited earnings refers merely to
the fact that you may continue to work and that will not of
itself reduce your social security benefits. Income TAx is
another thing. OH, in fact they lowered the age from 70 to
65 in fact, so real seniors may continue to work and not be
penalized by ss reductions.

> Is 401K disbursement considered "earnings" in this definition?
>
> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.


never heard of such an act.

>
> I can't find anything in the formal IRS documents explaining
> this. Can you point me to an IRS document covering this
> issue?


Just consult their web site and look for a publication about
senior citizens income and deductions.

> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement. Is this an error, or a change or what?


Not an error. All income goes together, the good, the bad
and the ugly, to determine how much of your social security
(up to 85%!) is taxable.

It's not pretty, but that's the way congress in it's finite
wisdom decided to do it. AFter all, I don't believe
congressmen draw social security since they have their own
generous retirement program.

Christmas Cheer$,
Harlan Lunsford, EA n LA

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Nan Eklund
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      12-22-2003, 10:04 PM
There's a difference between what is taxed (and age has
nothing to do with it) and what is received (and age has a
LOT to do with it. What you GET from Social Security can be
reduced IF you are still working and earning and you are
under age 65. For 2003, the limit if you are 64 or less,
is $11,280. That's wages and net income from
self-employment. What you are TAXED on depends on all your
income (wages, interest, capital gains, pensions, etc, etc)
and they don't care whether you are 8 or 80.

Nan, EA in LA

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Barney Bird
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      12-22-2003, 10:42 PM
"clackey" <(E-Mail Removed)> wrote:

> I have heard for years about "unlimited Earnings" after
> age 70 meaning "no income tax" on Social Security
> benefits after age 70.
>
> Is this true?
>
> I also read something about the "The Senior Citizens
> Freedom to Work Act" making some changes.


You are referring to the Senior Citizens Freedom to Work Act
of 2000 (Public Law 106-182), signed by President Clinton on
April 7, 2000. The Freedom to Work Act repealed the social
security earnings limit ($17,000 at the time the bill was
enacted) for beneficiaries aged 65 - 69. All this means is
that if you are age 65 or older you can earn as much as you
want or are able to and your social security benefits will
not be reduced. The Freedom to Work Act made no changes to
the formula for taxable social security benefits.

> Is 401K disbursement considered "earnings" in this definition?


No. Pension distributions are considered "unearned" income.
For purposes of determining your taxable social security,
earned and unearned income are treated the same.

> I can't find anything in the formal IRS documents
> explaining this. Can you point me to an IRS
> document covering this issue?


See IRS Publication 915.

http://www.irs.gov/publications/p915/index.html

http://www.irs.gov/pub/irs-pdf/p915.pdf

> The "trial version" of a tax program continues to tax my
> my Social Security Benefits when I add in the 1099R
> claiming my 401K disbursement. Is this an error, or a
> change or what?


Your tax program is calculating correctly.

Barney Byrd

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Lin706
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      12-22-2003, 11:21 PM
> The "trial version" of a tax program continues to tax my
> Social Security Benefits when I add in the 1099R claiming my
> 401K disbursement. Is this an error, or a change or what?


This is not an error. The rule about social security and
being age 70 only means that your social security benefit is
not reduced for earned income (wages). Depending on filing
status and total income, social security benefits can indeed
be taxable.

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