A lady stopped me asking, “I am 66 years old and I have been told that none of my Social Security is taxable!” Sorry! She had been misinformed; this is one of the biggest misunderstandings for those receiving Social Security benefits. Between the ages of 62 and 67 (66 or 65 for some) you have earning limitations placed on you by the Social Security office. This means that if you go over the earning limits, then you have to repay some of your Social Security benefits back to the Social Security office. Social Security Wage Income Limitations and Taxable Social Security benefits are two separate topics that often get confused. Taxable Social Security benefits looks at your total gross income not your age.
** Generally, if your only income for 2014 is only Social Security benefits, your benefits are not taxable.
** If you are single and your gross income-including Social Security-is more than $25k then your Social Security may be taxable.
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** If you are Married and your total gross income is more than $32k, then your Social Security may be taxable.
** If you are Married, but filing a Married but Separate tax return, then your Social Security is taxable.
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What is taxable Income? Most income a person receives is generally considered taxable; however, there are some situations when certain types of income not taxed. Non-taxable Income includes:
* Child support payments
* Workers’ compensation benefits
* Meals and Lodging for the convenience of your employer
* Compensatory Damages awarded for physical injury or physical sickness
* Welfare Benefits
* Cash Rebates from a dealer or manufacturer
Maybe taxable but usually not
* Life Insurance – funds received from policy due to a death
* Scholarship, Fellowship or Grant
Be sure to hire a licensed tax professional, an Enrolled Agent, America’s Tax Expert who specializes in Individual and small business taxes.
Check the preparer’s qualifications -- Make sure your preparer is qualified. The states of IN and IL do not required Tax Preparers to be Licensed, and per IRS, over 60% of tax preparers do not have any license credentials. There are two types of licensing – CPA, licensed by the state board of accountancy, and Enrolled Agents, licensed by US Dept. of Treasury.
Check the preparer’s history -- Check your preparer’s history by conducting your own research through various sources: Enrolled Agent www.inea.biz or CPA society www.incpas.org.
Courtesy of Andrew Stadler, EA
