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

Discussion in 'Tax' started by clackey, Dec 19, 2003.

  1. clackey

    clackey Guest

    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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    clackey, Dec 19, 2003
    #1
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  2. clackey <> 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 -
    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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    John H. Fisher, Dec 22, 2003
    #2
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  3. clackey <> 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

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    Rich Carreiro, Dec 22, 2003
    #3
  4. clackey

    Bill Guest

    Re: Social Security benefits taxed with "other

    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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    Bill, Dec 22, 2003
    #4
  5. 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?


    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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    Arthur Kamlet, Dec 22, 2003
    #5
  6. clackey

    A.G. Kalman Guest

    Re: Social Security benefits taxed with "other income" after age

    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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    A.G. Kalman, Dec 22, 2003
    #6
  7. Re: Social Security benefits taxed with "other income" after age

    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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    Harlan Lunsford, Dec 22, 2003
    #7
  8. clackey

    Nan Eklund Guest

    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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    Nan Eklund, Dec 22, 2003
    #8
  9. clackey

    Barney Bird Guest

    "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?
    >
    > 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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    Barney Bird, Dec 22, 2003
    #9
  10. clackey

    Lin706 Guest

    > 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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    Lin706, Dec 22, 2003
    #10
  11. "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?


    No. "Unlimited earnings" means that your social security
    benefits are not reduced for continuing to work after you
    begin drawing your benefits.

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


    No.

    > 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?


    Neither. It sounds like it's computing your taxes correctly.

    Joel Berry, CPA
    Sugar Land, Texas

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    Joel Berry, CPA, Dec 22, 2003
    #11
  12. clackey

    A.G. Kalman Guest

    Please Read This

    A.G. Kalman wrote:
    > 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.


    Most of you need to read my answer. The Social Security Act
    was amended to change the rule such that there would not be
    any reduction in benefits once the retiree reached full
    retirement age (FRA) as defined by Sec. 216(l) of the Soc.
    Sec. Act. This is the section that now means the FRA is
    going up from age 65. For those born in 1938 who are turning
    age 65 in 2003, the FRA is 65 plus two months.

    --

    Alan
    http://taxtopics.net

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    A.G. Kalman, Dec 24, 2003
    #12
  13. Re: Social Security benefits taxed with "other income" after age

    Harlan Lunsford wrote:

    (snipped.....)

    > 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.


    speaking of which, my wife informed me other day that
    congress people continue to draw their full salary as
    retirement income. I didn't want to tell her she's wrong,
    after all I didn't know, but suspected that is not the case.

    Can anyone comment? (other than my decision not to argue
    with my wife?)

    Christmas Cheer$,
    Harlan Lunsford, EA n LA

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    Harlan Lunsford, Dec 24, 2003
    #13
  14. clackey

    Charlie48K Guest

    Re: Social Security benefits taxed with "other income" after age

    > speaking of which, my wife informed me other day that
    > congress people continue to draw their full salary as
    > retirement income. I didn't want to tell her she's wrong,
    > after all I didn't know, but suspected that is not the case.
    >
    > Can anyone comment? (other than my decision not to argue
    > with my wife?)


    Congress has paid social security since 1983 and do not
    automatically retire with their full salary, See this web
    site for a full discussion.

    http://www.truthorfiction.com/rumors/c/congressionalpensions.htm

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    Charlie48K, Dec 29, 2003
    #14
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