Newsletter

How much, if any, of your Social Security benefits are taxable? It depends on your total income and marital status. Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. (See below for more on base amounts.)

This quick computation will help you determine whether some of your benefits may be taxable:

• First, add one-half of the total Social Security you received to all your other income, including any tax-exempt interest and other exclusions from income.

• Then, compare this total to the base amount for your filing status.

The 2010 base amounts are:

• $32,000 for married couples filing jointly
• $25,000 for single, head of household, qualifying widow/widower with a dependent child or married individuals filing separately who did not live with their spouses at any time during the year
• $0 for married persons filing separately who lived together during the year

According to the Social Security Administration, less than one-third of all current beneficiaries pay taxes on their benefits.

Call us for additional information on the taxability of Social Security benefits.

In most situations, the tax withheld from your pay will be close to the tax you figure on your return - if you follow these two rules.

• You accurately complete all the Form W-4 worksheets that apply to you.

• You give your employer a new Form W-4 when changes occur.

But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations:

• You are married and both you and your spouse work.

• You have more than one job at a time.

• You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income.

• You will owe additional amounts with your return, such as self-employment tax.

• Your withholding is based on obsolete Form W-4 information for a substantial part of the year.

• Your earnings are more than $130,000 if you are single or $180,000 if you are married.

• You work only part of the year.

• You change the number of your withholding allowances during the year.

If you need help downloading Form W-4 or have questions on how to fill it out properly, give us a call. We're happy to help.