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retirement & pension

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It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter.

R is for Required Minimum Distributions.

Generally, the goal of a retirement account is to defer tax – and let the account grow – for as long as possible. But at some point, you normally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 70½ (with a Roth, you don’t have to take withdrawals until after the account owner’s death). Those mandatory withdrawals are called required minimum distributions (RMDs).

The amount of your RMD is figured by taking the account balance as of the end of the immediately preceding calendar year and dividing it by a number of years typically based on your life expectancy (some exceptions apply). You have to take at least that much each year. If you don’t take your RMD, or you don’t take enough, you’ll be subject to an excise tax. You can, however, withdraw more if you want to.

Withdrawals are taxable. That means that they will be included in your taxable income (except for any part that was taxed earlier) or that can be received tax-free (such as qualified distributions from designated Roth accounts). 

For IRAs, the beginning date for your first RMD is April 1 of the year following the calendar year in which you reach age 70½ if you were born before July 1, 1949, or April 1 of the year following the calendar year in which you reach age 72 if you were born after Jun 30, 1949. For 401(k) and 403(b) plans, profit-sharing plans, or other defined contribution plans, the beginning date for your first RMD is April 1 of the year in which you reach age 70½ if you were born before July 1, 1949, or April 1 of the year following the calendar year in which you reach age 72 if you were born after Jun 30, 1949 (or the date that you retire, if later, and if your plan allows). For each year after your required beginning date, you must withdraw your RMD by December 31.

For purposes of calculating your age, you’re considered to have reached age 70½ on the date that is 6 calendar months after your 70th birthday.

There are some important changes to RMDs in 2020. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) waives RMD payments for 2020, including for inherited IRAs. The waiver includes RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020.

If you have already taken your RMD in 2020, you can choose to return it or roll it over:

  • If you have already received an RMD in 2020, you can repay the distribution to the distributing IRA no later than August 31, 2020, to avoid paying taxes on that distribution; OR
  • Since the RMD rules are suspended, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA or qualified retirement plan, or returned to the original plan. (There are some restrictions, including a one rollover per 12-month period limit and the exclusion of inherited IRAs on rollovers, so check out IRS Notice 2020-51 (PDF) for more information.)

The RMD suspension does not apply to qualified defined benefit plans (like pension plans).

More information on the CARES Act and retirement plans can be found on the IRS website at Coronavirus-related relief for retirement plans and IRAs questions and answers.

You can find the rest of the series here:

When the stimulus check details were announced, I noticed a sharp uptick in questions about Social Security retirement, Social Security Disability (SSDI) and Supplemental Security Income (SSI) benefits. Mainly, folks wondered, “What’s the difference?”

Here’s a quick breakdown.

What are Social Security retirement benefits?

Wages and self-employment income are subject to Social Security and Medicare taxes. Together, Social Security and Medicare taxes are known as FICA (Federal Insurance Contributions Act) taxes and are taken right out of your paycheck. Taxes on self-employment income are separately referred to as SECA (Self-Employment Contributions Act) taxes since self-employed persons pay both the employee and employer contributions.

If you’re employed, you pay Social Security tax (6.2%) as the employee, and your employer also pays the same rate of tax (6.2%); again, if you’re self-employed, you pay both portions.

Unlike Medicare, Social Security taxes are subject to a wage cap. In other words, you pay Social Security taxes on your earnings until you hit a magic number. After that, your wages are no longer subject to Social Security taxes. For 2020 that magic number is $137,700. That means that whether you made $1,000 or $100,000, you will pay Social Security taxes on that income. But if you earn $137,701? You’ll pay Social Security taxes on $137,700, but not on the extra dollar. And if you earn $1,137,700? You’ll pay Social Security taxes on $137,700 but not on the extra million.

Your employer collects those Social Security payments and remits them to the government on your behalf (or you pay them directly if you’re self-employed). These taxes are sometimes referred to as “trust fund” taxes and are credited towards your retirement benefits.

The number of credits you need to get retirement benefits depends on when you were born: If you were born in or after 1929, you need 40 credits, or 10 years of work, to collect retirement benefits. The amount of your benefits depends on how much you earned during your lifetime. Remember, while you’re working, you are paying a percentage of your earnings in Social Security taxes, which means that more money (and thus, more tax) should mean more benefits. If you are out of work for some time or earn less money, your benefits should be lower.

It’s also one of the reasons you should be careful about receiving pay under the table: those funds (unless you report them) won’t count towards your credits.

The age at which you decide to retire also affects your benefit. If you retire at age 62, the earliest possible Social Security retirement age, your benefit will be lower than if you wait. But if you were born in 1953 or earlier, you’re eligible for your full Social Security benefit now. The full retirement age is 66 if you were born from 1943 to 1954 and increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67.

Other family members may be entitled to benefits, including spouses who never worked or have low earnings. If you’re eligible for both your own retirement benefits and spousal benefits, Social Security will pay your own benefits first. If your spousal benefits are higher than your own retirement benefit, you’ll get a combination of benefits equaling the higher spouse benefits.

Overall, benefits typically work out to about 40% of preretirement income. As of last quarter, the average monthly check for retired workers, excluding spouses and dependents, totaled $1,463.19 (or $17,558.28 per year).

Once you reach retirement age, you may have to pay income tax on your benefits depending on your filing status and how much other income you receive. For more on whether your Social Security benefits are taxable, click here.

What are SSDI benefits?

SSDI is the abbreviation for Social Security Disability Insurance. Social Security pays benefits to people who can’t work because they have a medical condition that’s expected to last at least one year or result in death. Yes, that sounds ominous, but that’s the definition of disability under federal law.

SSDI is available for workers that, like Social Security retirement beneficiaries, have earned a sufficient number of credits. To qualify, you normally must meet two different earnings tests:

  1. A recent work test, based on your age at the time you became disabled; and 
  2. A duration of work test to show that you worked long enough under Social Security. 

(Certain blind workers have to meet only the duration of work test.)

The tests are based on your age at the time of your disability. But, generally, you can take the year you became disabled and subtract the year you attained age 22, to get the number of quarters of coverage necessary to meet the duration requirement.

Here’s a quick example: Let’s say you were born in 1970, and you became disabled in 2020. The math is 2020-(1970+22) = 28 quarters (or seven years).

When you apply, Social Security will forward your information to a state agency to make the initial disability determination decision. Your doctors don’t decide if you’re disabled. The state agency staff will review your information and may ask you to go for another examination.

  • If your application is approved, you’ll get a letter showing the amount of your benefit, and when your payments start. 
  • If your application isn’t approved, the letter will explain why and tell you how to appeal the determination if you don’t agree.

If you are getting other benefits, like worker’s compensation, the total amount of SSDI available to you may be affected.

Like Social Security retirement benefits, SSDI benefits are typically not taxable. However, if you receive SSDI and another source of income, your benefits may be taxed.

What Are SSI benefits?

SSI is the abbreviation for Supplemental Security Income. SSI gives monthly cash assistance to people with limited income and resources who are age 65 or older, blind or disabled. Children with disabilities can get SSI, too.

To qualify, you must meet the income and resources tests:

  • Typically, your countable income must not exceed the federal benefit rate (FBR). The FBR for 2020 is $783 per month for individuals and $1,175 for couples. If you make more, you may be eligible for a decreased benefit. Generally, the more countable income you have, the less your SSI benefit will be.
  • Your resources (like real estate, bank accounts, cash, stocks, and bonds) must be $2,000 or less ($3,000 for a couple). Your resources do not usually include the home and land where you live; life insurance policies with a face value of $1,500 or less; your car; burial plots for you and members of your immediate family; and up to $1,500 in burial funds for you and up to $1,500 in burial funds for your spouse.

Some states add a supplement, making payments and allowable income levels higher. States that do not have a supplement include Arizona, Mississippi, North Dakota, and West Virginia.

If you get SSI, you may also be able to get help from your state or county, including Medicaid, food, or other social services (call your local social services department or public welfare office for information). Additionally, if you get SSI, you may qualify to get help to buy food through the Supplemental Nutrition Assistance Program (SNAP). If everyone in your home is applying for or getting SSI, you can apply for SNAP through your Social Security office.

For federal purposes, SSI benefits are not taxable.


This meant to be a quick primer, but as you might imagine, the specifics are important (it’s a government program and they like rules). For more on Social Security retirement, SSDI and SSI benefits, contact the Social Security Administration (https://www.ssa.gov/agency/contact/).

And one more thing: YES, all of these folks (those receiving retirement, SSDI, and SSI benefits) are entitled to a stimulus check so long as they meet the other criteria.

Winston Churchill was alleged to have said, “You can depend upon the Americans to do the right thing. But only after they have exhausted every other possibility.”

Today, Americans did the right thing.

On March 27, 2020, President Trump signed the CARES Act into law. Among other things, the CARES Act provided economic relief in the form of stimulus checks called “recovery rebates.” The checks are $1,200 per adult – or $2,400 for married couples filing jointly – and an additional $500 per child. For many taxpayers, checks would be sent out based on your most recently filed tax return (2018 or 2019). Those who don’t usually file a tax return because they rely on Social Security benefits (or RRB equivalent) were entitled to a check without having to do anything else: Congress has provided Treasury with a mechanism in the CARES Act for relying on forms 1099-SSA (or RRB equivalent) to issue checks.

Relying on that language, I wrote about it – as did many others – and for a few days, the knowledge that they didn’t have to do anything further for benefits provided a sense of relief for seniors. But that changed with a single notice from the Internal Revenue Service (IRS).

On March 31, 2020, I posted this story about the notice – which purported to explain the necessary steps for some folks to receive stimulus checks. The guidance included several sentences that seem contrary to the language in the CARES Act, including advice that “some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.”

I was shocked that Treasury and the IRS appeared to be taking a position that was so different from what was in the CARES Act. So I made some phone calls and emails seeking further clarification. I reached out to the IRS, the White House, Senate Majority Leader Mitch McConnell (R-KY), Speaker of the House Nancy Pelosi (D-CA), and others in Congress about the language in the Act. Practically nobody in DC wanted to talk about it.

But seniors (including vets) and the disabled – and those that care for them – were angry. They sent me emails begging for help. I followed up with some of their stories in this piece.

I try not to take sides in my pieces. I just want to deliver the facts to you. But it was hard not to take sides on this one. Because the facts were that this result – asking our seniors and the disabled to take extra steps to file tax returns during a pandemic – wasn’t the right one. So, in the article, I urged folks who wanted to call attention to this issue to reach out to Congress. And you did. I know that you did because you messaged, emailed, and tweeted me that you had. And your efforts paid off.

You made a difference. Earlier today, 41 Senators sent a letter to Treasury and the Social Security Administration for a correction. And, the question of whether additional returns were required was raised at the White House briefing today.

And Treasury changed course. On the evening of April 1, 2020, Treasury issued the following statement:

The U.S. Department of the Treasury and the Internal Revenue Service today announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive an Economic Impact Payment. Instead, payments will be automatically deposited into their bank accounts.  

“Social Security recipients who are not typically required to file a tax return do not to need take an action, and will receive their payment directly to their bank account,” said Secretary Steven T. Mnuchin. 

The IRS will use the information on the Form SSA-1099 and Form RRB-1099 to generate $1,200 Economic Impact Payments to Social Security recipients who did not file tax returns in 2018 or 2019. Recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.

The IRS has also updated their website with the following statement:

The IRS will use the information on the Form SSA-1099 or Form RRB-1099 to generate Economic Impact Payments to recipients of benefits reflected in the Form SSA-1099 or Form RRB-1099 who are not required to file a tax return and did not file a return for 2019 [sic] or 2019. This includes senior citizens, Social Security recipients and railroad retirees who are not otherwise required to file a tax return.

So, you did it. You made your voices heard. And in the middle of a pretty remarkable time, you proved that as a nation, we are stronger together. 

Things are happening at a rapid-fire pace these days. As tax updates become available, we’ll keep you updated. Keep checking back for details.

(Update: Treasury and IRS have changed course and seniors who do not usually file a tax return do not need to file to get a check.)

“Please help me.

That was the message that I received over and over yesterday from seniors. 

Yesterday, I posted this story about a notice from the Internal Revenue Service (IRS) purporting to explain the necessary steps for some folks to receive stimulus checks. The guidance included several sentences that seem contrary to the language in the CARES Act, including advice that “some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.”

It’s confusing language because Congress has provided Treasury with a mechanism in the CARES Act for relying on forms 1099-SSA (or RRB equivalent) to issue checks. Relying on that language, I wrote about it – as did many others – and for a few days, the knowledge that they didn’t have to do anything further for benefits provided a sense of relief for seniors.

But that notice changed everything. Within minutes of posting my story, the emails started coming in.

  • “please advise me how i can obtain stimulus check once u find out more information.”
  • “I have no access to going outside and cannot ask any tax preparer since they’re not around.”
  • “…most of us seniors out here in social isolationland have no clue as to how to proceed, who to call or what we are supposed to do.”
  • “Please help!”
  • “This Coronavirus is Extremely stressful.”
  • “I’m a 100% disabled veteran. I receive benefits from the VA. I don’t pay taxes. What will I have to do to receive the stimulus check.”
  • “No church, No friends and Daily problems getting food.”
  • “Things are not so good for me presently.”
  • “… according to their response I can file a paper copy and mail it to the IRS. Which means I have to go out and find a paper copy as I don’t have a working printer at home. Then go to the post office and wait for who knows how many months for the paper work to be processed and then the check deposited in my bank account. “
  • “I have new heart, lung and kidney issues from this flu and I sure could use the help to pay for the ER visit and the ambulance ride.”
  • “I receive all of my income from Social Security and have nothing basically. I am very high risk for COVID 19 with a pre existing respiratory disease. Now if I want the stimulus money I have to go out and file it. I don’t have stamps. I don’t even have a printer so since I can’t file I am SOL unless I want to go risk my life.”

There were stories about seniors struggling with cancer. Stories about those who have been laid off. I heard from those on disability. And I heard from those who feel trapped by their current circumstances.

It was heartbreaking.

So I made calls. And I sent emails. I asked the IRS what they were doing to help. I asked many members of Congress about this, including Sen. Majority Leader Mitch McConnell (R-KY), Speaker of the House Nancy Pelosi (D-CA), and both Senators from my own state of Pennsylvania, Sen. Bob Casey, Jr. (D-PA) and Sen. Pat Toomey (R-PA). I also reached out to the White House. 

I received only one response. One. Congresswoman Kendra Horn (D-OK), who had expressed concerned to constituents over this issue on her Facebook FB page, emailed me the following statement:

The IRS announcement that many seniors, disabled veterans, and social security beneficiaries will have to file a simplified tax return to receive their economic impact payments goes against the spirit and the intent of the law that we passed. The CARES Act is focused on delivering immediate help to Americans in need. That includes many Social Security and Veterans Administration beneficiaries who are not required to file taxes. Now the IRS has created unnecessary hurdles for those communities to receive help. I urge Treasury Secretary Mnuchin and Social Security Administrator Saul to uphold the intent of the CARES Act by allowing vulnerable groups to receive their economic impact payments without additional action.

Shortly before this piece was to be published, I received a copy of a letter from some U.S. Senators directed to Treasury Secretary Mnuchin and Social Security Administration Commissioner Saul expressing alarm over this recent guidance. “This [IRS] filing requirement would place a significant burden on retired seniors and individuals who experience disabilities, especially given the current unavailability of tax filing assistance from Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs during the COVID-19 crisis,” wrote the Senators. “We strongly urge you to ensure that economic stimulus payments are automatically sent to vulnerable seniors and individuals who experience disabilities, without these individuals needing to file a tax return.”

You can read the full letter here.

The letter was signed by 41 Senators: Maggie Hassan (D-NH), Sherrod Brown (D-OH), Bob Casey (D-PA), Chuck Schumer (D-NY), Ron Wyden (D-OR), Sheldon Whitehouse (D-RI), Thomas R. Carper (D-DE), Michael F. Bennet (D-CO), Robert Menendez (D-NJ), Catherine Cortez Masto (D-NV), Debbie Stabenow (D-MI), Benjamin L. Cardin (D-MD), Mark R. Warner (D-VA), Richard J. Durbin (D-IL), Jeanne Shaheen (D-NH), Richard Blumenthal (D-CT), Jacky Rosen (D-NV), Doug Jones (D-AL), Jack Reed (D-RI), Amy Klobuchar (D-MN), Edward J. Markey (D-MA), Gary C. Peters (D-MI), Tim Kaine (D-VA), Martin Heinrich (D-NM), Bernard Sanders (I-VT), Mazie K. Hirono (D-HI), Tom Udall (D-NM), Chris Van Hollen (D-MD), Tammy Duckworth (D-IL), Tammy Baldwin (D-WI), Angus S. King, Jr. (I-ME), Tina Smith (D-MN), Christopher A. Coons (D-DE), Patty Murray (D-WA), Kyrsten Sinema (D-AZ), Elizabeth Warren (D-MA), Cory Booker (D-NJ), Patrick Leahy (D-VT), Kirsten Gillibrand (D-NY), Chris Murphy (D-CT), and Maria Cantwell (D-WA).

Despite the noise, as of this writing, nothing has changed. Treasury has not issued a public statement, and the IRS has not responded to my request for comment.

If the guidance stands, seniors and those with disabilities who otherwise don’t have a filing requirement will be required to file something – no matter how simple – to collect a stimulus check, even though the law provides an alternative. If those folks can’t file or don’t receive the necessary information, they’ll miss out on funds they may be counting on at a time where they may not be able to rely on family, churches, friends, and charities.

That could be someone’s grandmother. It may be a vet who fought to keep you safe. It may be a former school teacher, counselor, or first responder. It could be your neighbor. It could be you.

If you’d like to make your voice heard, here’s how you can contact your elected officials:

I’ll continue to update you as information becomes available.

(Update: Treasury and IRS changed course and will not require returns.)

Each year, about 64 million people collect Social Security benefits: about one family in four receives some kind of Social Security benefits. Of those, nearly 45 million are retired workers who receive, on average, $1,471 per month; another 3 million individuals receive benefits as spouses or children of retired workers.

Social Security benefits represent about 33% of the income of the elderly. According to the Social Security Administration, among the elderly, half of married couples and 70% of unmarried persons receive 50% or more of their income from Social Security. Nearly 21% of married couples and about 45% of unmarried persons rely on Social Security for 90% or more of their income.

Compare those numbers to just 25,972,101 taxpayers over the age of 65 who filed in 2018 (according to the most recent IRS data available). 

That means more than 20 million taxpayers over the age of 65 do not file a federal income tax return each year – likely because their only source of income is Social Security benefits. 

Initially, that wasn’t a barrier to getting stimulus checks. Congress provided Treasury with a mechanism in the CARES Act for relying on forms 1099-SSA (or RRB equivalent) to issue checks. That carve-out is in the same paragraph that gives taxpayers an alternative if they haven’t filed for the 2019 tax year (Treasury can refer to their 2018 tax return). I wrote about it – as did many others – and for days, the knowledge that they didn’t have to do anything further for benefits provided a sense of relief for seniors. Until Monday, March 30, 2020.

On Monday, the Internal Revenue Service (IRS) posted a notice about the checks. The guidance included several sentences that seem contrary to the language in the law. Specifically, the guidance advised, “However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.”

Tax professionals like me expected that some non-filers would have to file returns to receive checks. Otherwise, how would the IRS know how to reach them, or that they existed at all?

But seniors? Seniors for whom the Social Security Administration issues tax statements each year AND requires direct deposit for benefit checks? Why the need for more paperwork?

So far, the IRS isn’t commenting. 

But, according to Chye-Ching Huang, Senior Director for Economic Policy at the Center on Budget and Policy Priorities, this wasn’t supposed to be the result of the legislation. The Treasury, she notes, was given “clear and explicit authority” to issue checks based on information available from the Social Security Administration. 

Here’s the language from the law (downloads as a PDF): “if the individual has not filed a tax return for such individual’s first taxable year beginning in 2018, use information with respect to such individual for calendar year 2019 provided in— (i) Form SSA–1099, Social Security Benefit Statement, or (ii) Form RRB–1099, Social Security Equivalent Benefit Statement.”

That language was, Huang says, pretty clearly intended to avoid the mistakes of the past. In 2008, nearly 20 million taxpayers who were traditionally non-filers were required to file tax returns to get rebate checks. That’s why it took almost three months for some taxpayers to receive their checks.

At the time, then National Taxpayer Advocate, Nina Olson, criticized the move, testifying to Congress that it was unnecessary and burdensome for those in need (downloads as a PDF). Specifically, Olson noted in 2008 that there were “significant barriers that will result in substantially less than full participation by this target population.” Some challenges Olson noted were a lack of Internet access or discomfort obtaining tax information from the Internet; lack of mobility; including those who are incapacitated and under the care of guardians, conservators, or nursing homes and hospitals; fear of the IRS or losing benefits; and confusing messages. An estimated 3.5 million of those eligible never got their checks at all that year.

Olson suggested that it may be better to utilize another federal agency for payment delivery, querying at the time, “The 20.5 million Social Security and Veterans Affairs beneficiaries all receive payments from those agencies, and many of those payments are directly deposited into bank accounts. Why not find a way to let those agencies make stimulus payments to individuals without a tax filing requirement instead of requiring them to file ESP-only returns and having the IRS then send them paper checks?”

That was in 2008 when seniors weren’t been told to stay in their homes and tax offices were not shut down. Now, Huang notes, the current COVID-19 crisis has made it even harder for those people to file. Free tax centers for seniors, such as AARP Tax-Aide, are now closed. Tax professionals are staying at home. And statistically, the elderly are among the most vulnerable to COVID-19. So why design a system where they may not be able to get financial assistance without exposing themselves to danger?

Throw in the potential for increased scams targeting the elderly, and it’s a recipe for disaster.

For its part, the IRS seems to think that the workaround is simply to wait, advising, “For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.”

For some seniors with bills to pay and food and medication to buy, that might be too late.

Requests for comment made to House Speaker Nancy Pelosi (D-CA), Senate Majority Leader Mitch McConnell (R-KY), other members of Congress, and the White House were not immediately returned.

All local Social Security offices will be closed to the public for in-person service starting Tuesday, March 17, 2020. According to the Social Security Administration, “This decision protects the population we serve—older Americans and people with underlying medical conditions—and our employees during the Coronavirus (COVID-19) pandemic.”

COVID-19 is the official name for the infectious disease caused by the most recently discovered coronavirus. According to the World Health Organization, as of March 15, 2020, there are 153,517 confirmed cases of COVID-19 in 144 territories and countries. According to Johns Hopkins, the United States has 3,813 confirmed cases.

With offices closed, the agency encourages the public to access services online. You can go online to apply for retirement, disability, and Medicare benefits, check the status of an application or appeal, request a replacement Social Security card, or print a benefit verification letter. There is also a Frequently Asked Questions section

If you’re working on filing your taxes, you can also get a copy of your annual Benefit Statement online. Your form SSA-1099, Social Security Benefit Statement, or form SSA-1042S, Social Security Benefit Statement (Nonresident Aliens), should land in your mailbox by the end of January. But if you haven’t received your form yet and you live in the United States, you can print a copy. You may not have to pay tax on your benefits, but you’ll need your forms to figure that out.

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If you have questions that cannot be answered online, check the online field office locator to learn how to directly contact your local office for phone service. For automated telephone services, call 1.800.772.1213 (TTY 1.800.325.0778). A list of telephone services is available online.

If you already have an in-office appointment scheduled with the agency, they will call you to handle your appointment over the phone. Additionally, if you have a hearing scheduled, they will call you to discuss alternatives, including offering a hearing by phone. Please note that the call may come from a private number and not from a U.S. Government phone number. There are some scam calls making the rounds, so remember that Social Security employees will not threaten you or ask for any form of payment.

The Social Security Administration is working closely with the Centers for Disease Control and Prevention (CDC), state and local governments, and other experts to monitor COVID-19 and advise when they can resume in-person service. You can also visit the Social Security Administration’s Coronavirus (COVID-19) information page.

In February of 2020, more than 69 million people collected a check for Social Security, Supplemental Security Income (SSI), or both. The majority of those beneficiaries (nearly 50 million) were over the age of 65. Many of those seniors will receive those benefits tax-free, while others may be required to pay tax on their benefits. Are your Social Security benefits taxable? Here’s what you need to know.

Social Security benefits are designed to supplement income in retirement (and provide specific benefits for the disabled, spouses, and dependents). Typically, benefits work out to about 40% of pre-retirement income. However, the actual amount received can vary depending on your lifetime earnings. As of February 2020, the average monthly check for retired workers, excluding spouses and dependents, totaled $1,507.01, or $18,084.12 per year.

Once you reach retirement age, whether your Social Security benefits are taxable depends on your filing status and how much other income you receive. To determine if that applies to you, you’ll need your Form SSA-1099, Social Security Benefit Statement. That’s the tax form that reports your total Social Security benefits. If you don’t have it, here’s how to get it.

You’ll also need your Forms W-2, 1099, K-1, or other supporting documents related to your income for the year. You should have them handy since most were due to you by January 31: If you don’t have yours yet, check here for what to do.

Use the numbers on those forms to see which applies to you:

  • If your only source of income is your Social Security check, your benefits are generally not taxable. You may not even need to file a return.
  • If you received income from other sources, your benefits would not be taxed unless your modified adjusted gross income (MAGI) is more than the base amount for your filing status.

The quick and dirty version of the MAGI formula is to add one-half of the total Social Security benefits you received (that’s what is reported on Form SSA-1099) to all your other income, including any tax-exempt interest and other exclusions from income. Compare that total to the base amount for your filing status. If the total is more than the base amount for your filing status, some of your benefits may be taxable.

Or, put another way, you will not be taxed on your benefits if: your adjusted gross income PLUS nontaxable interest AND ½ of your Social Security benefits is LESS THAN the base amount.

The base amounts are:

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

Here’s a quick example. Let’s say you’re a single taxpayer with Social Security benefits of $15,600. Let’s say you have $1,000 in dividends, $1,000 in taxable interest and $6,000 in other income. Your MAGI is: $15,800 = $7,800 (1/2 of SS benefits) + $8,000 (dividends, taxable interest and tax-exempt interest). Since that total is less than $25,000 (the base amount for your filing status), your Social Security benefits would not be taxable.

Here’s another example: Let’s say you’re a single taxpayer with Social Security benefits of $20,000. Let’s say you have $10,000 in dividends, $10,000 in taxable interest and $12,000 in other income. Your MAGI is: $42,000 = $10,000 (1/2 of SS benefits) + $32,000 (dividends, taxable interest and tax-exempt interest). Since that total is more than $25,000 (the base amount for your filing status), part of your Social Security benefits would be taxable.

If part of your Social Security benefits is taxable, the taxable amount depends on the total amount of your benefits and your other income. As a rule, the higher your total income, the higher the percentage of your Social Security benefits subject to tax.

If you owe tax on your Social Security benefits, typically up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if your MAGI is more than $34,000 ($44,000 if you are married filing jointly) or if you are married filing separately and lived with your spouse at any time during 2019. No one pays federal income tax on more than 85% of their Social Security benefits. 

You can figure the precise amount using Worksheet 1, found in Pub 915 (downloads as a PDF).

When calculating whether benefits are taxable, only include those benefits that are legally yours. If you and your child receive benefits, but the check for your child is made out in your name, use only your part of the benefits to see whether you might owe tax. The benefits paid to the child must be added to your child’s other income to see whether any of those benefits are taxable.

If your benefits are taxable, here’s how to report them:

  • You must file using Form 1040 or the new Form 1040-SR, U.S. Tax Return for SeniorsIt’s designed for older taxpayers with bigger print and increased attention to the additional standard deduction for those 65 or older.
  • Report your net benefits (the total amount from box 5 of all Forms SSA-1099 and Forms RRB-1099) on line 5a and the taxable part on line 5b of Form 1040 or Form 1040-SR.
  • If you are married filing separately, and you lived apart from your spouse for all of 2019, also enter “D” to the right of the word “benefits” on line 5a.

If none of your Social Security benefits are taxable, you may still need to file a tax return, depending on your circumstances. If that’s the case, here’s how to report your nontaxable benefits:

  • Again, you must file using Form 1040 or Form 1040-SR.
  • Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 5a of Form 1040 or Form 1040-SR. Next, enter 0 on line 5b.
  • If you are married filing separately, and you lived apart from your spouse for all of 2010, also enter “D” to the right of the word “benefits” on line 5a.

If you owe tax year after year because of your other income, you may want to make adjustments. You can make estimated payments or adjust your withholding. You can change your withholding by completing a form W-4VVoluntary Withholding Request (2020 version downloads as PDF), and returning it to your local Social Security office by mail or in-person (you can find the address here). When you complete the form, you will need to select the percentage of the monthly benefit amount you want to be withheld. You can withhold 7%, 10%, 12%, or 22% of your monthly benefit for taxes: flat dollar amounts are not accepted. If you have questions about your tax liability or want to request a Form W-4V, you can also call the IRS at 1.800.829.3676. (If you are deaf or hard of hearing, call the IRS TTY number, 1.800.829.4059.)

For more information, consult with your tax professional and check out IRS Pub 915 (downloads as a PDF).

Scammers aren’t just relying on robocalls and voice mails to reach potential victims: they’re now texting. The Inspector General of Social Security, Gail S. Ennis, recently issued a warning about a new scam involving text messages that appear to come from Social Security. The texts warn about a Social Security number problem and ask the recipient to call a number to resolve the issue and avoid legal action.

This is a trick by identity thieves hoping to steal money and personal identifiable information (PII). Like the Internal Revenue Service (IRS), the Social Security Administration(SSA) will never send a text asking for a return call to an unknown number. 

However, SSA may send text messages if you have requested or subscribed to receive updates and notifications from SSA by text, or as part of Social Security’s enhanced security when accessing your personal my Social Security account (two or multi-factor verification).

And, like the IRS, the SSA will never:

  • Threaten you with arrest or other legal action unless you immediately pay a fine or fee.
  • Require payment by retail gift card, wire transfer, internet currency, or by mailing cash.
  • Send official letters or reports containing your personal information via email.

Also, the SSA will never promise a benefit increase or other assistance in exchange for payment.

If you owe money to the IRS or SSA, you’ll receive a letter with payment options and appeal rights. According to SSA, you should never pay a government fee or fine using retail gift cards, cash, internet currency, wire transfers, or pre-paid debit cards. You can find out more about IRS payment options here.

Inspector General Ennis has designated March 5, 2020, as National “Slam the Scam” Day to educate every American about these sinister scams. You can learn more at the SSA OIG website

You can also join Inspector General Ennis and Monica Vaca, Associate Director, Consumer Response and Operations at the Federal Trade Commission, for a special joint Facebook Live. It’s called “Slam the Scam: That call is not from Social Security,” and starts at 7:00 p.m. E.T. on March 5, 2020. 

When in doubt, assume it’s a scam. If you’re not sure whether a call is legitimate, hang up and call back using an official number (don’t just use the caller I.D. number on your phone since those can be spoofed). To reach IRS, call 1.800.829.1040. To contact Social Security, call 1.800.772.1213.

If you know for sure that it’s a scam, don’t engage with scammers or thieves, even if you want to tell them that you know it’s a scam, or you think that you can beat them. Just hang up or delete the email. You can find more tips on protecting yourself from identity-theft-related tax fraud here.

And one more thing: the SSA encourages you to please share scam awareness information with friends and family to help them avoid becoming victims.

Looking for your tax forms, like your W-2 or 1099-MISC? Most tax forms should be in your mailbox or on their way – but if you don’t have them in hand just yet, there are steps that you can take to make sure that you have what you need when it’s time to file.

If you’re looking for your annual Benefit Statement from the Social Security Administration (SSA), you’re in luck: things just got a little easier. Your form SSA-1099, Social Security Benefit Statement, or form SSA-1042S, Social Security Benefit Statement (Nonresident Aliens), should land in your mailbox by the end of January. But if you haven’t received your form yet and you live in the United States, you can print a replacement form online. 

Simply click over to my Social Security on the SSA website. If you don’t already have an account, click the button to start. If you already have an account, simply log in to your account to view and print the form.

SSA screenshot
SSA

To create an account, you’ll need to have the following information handy:

  • A valid email address;
  • Your Social Security number; and
  • A U.S. mailing address.

You’ll enter this information on the next few screens which look like this:

SSA screens
SSA

Once you’ve created the account, you can request the request form. Just note that you can’t request a replacement form SSA-1099 or SSA-1042S for 2019 until after February 1, 2020.

You must be at least 18 years of age to create an account and you can only create an account for yourself. You cannot create an account for another person even if you have that person’s written permission – that includes lawyers, accountants and representative payees. The penalties for violating that rule can be steep and include civil and criminal penalties (or both).

One more thing: These forms are for your “regular” Social Security benefits. Forms SSA-1099 and SSA-1042S are not available for people who receive Supplemental Security Income (SSI) benefits.