Are taxes withheld from Social Security benefits?

An interesting question about taxation of Social Security benefits was asked last week during a retirement seminar. The person knew that his overall income after retirement would be high enough for a portion of his Social Security retirement to be taxable and asked if those taxes would be withheld from his monthly retirement benefits.

They would not be unless he requested it.Taxes are not routinely withheld from Social Security benefits. 

Based on overall income, about one-third of people receiving Social Security have to pay federal income taxes on a portion of those benefits. Of these people, some pay tax on up to 50 percent of benefits and some on up to 85 percent of benefits. No one pays federal income tax on more than 85 percent of his or her Social Security benefits.

Based on Internal Revenue Service (IRS) rules, if you file a federal tax return as an “individual” and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. With income more than $34,000, up to 85 percent of your benefits may be taxable. If you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits. With income more than $44,000, up to 85 percent of your benefits may be taxable. If married and filing a separate tax return, you probably will pay taxes on your benefits. See http://www.socialsecurity.gov/planners/taxes.htm. SSA personnel cannot provide tax advice.

 Although taxes are not routinely withheld from Social Security benefits, you can request voluntary Federal tax withholding from them.To do this, complete Internal Revenue Service (IRS) form W-4V (Voluntary Withholding Request) (http://www.irs.gov/pub/irs-pdf/fw4v.pdf ) and return it to your local Social Security office. When completing the W-4V you select a percentage of benefits for tax withholding, not a flat dollar amount. Options are to have 7 percent, 10 percent, 15 percent or 25 percent of your monthly benefit withheld. Voluntary withholding is only for Federal taxes, not state or local taxes.

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