Seven Facts About Social Security Benefits

Seven Facts About Social Security Benefits

If you received Social Security benefits in 2009, you need to know whether or not these benefits are taxable. Here are seven facts the Internal Revenue Service wants you to know about Social Security benefits so you can determine whether or not they are taxable to you.

1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.

2. Generally, if Social Security benefits were your only income for 2009, your benefits are not taxable and you probably do not need to file a federal income tax return.

3. 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.

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

5. You can do the following quick computation to determine whether some of your benefits may be taxable:

• First, add one-half of the total Social Security benefits 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. If the total is more than your base amount, some of your benefits may be taxable.

6. The 2009 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.

7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The American Recovery and Reinvestment Act of 2009: Information Center

The American Recovery and Reinvestment Act of 2009: Information Center

The IRS is implementing the tax-related provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) as quickly as possible. More information on these and other provisions of the recovery program will be available on this Web site as it becomes available.

Information for Individuals

Some of the provisions of the law primarily affect individuals.

• Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans. To make sure enough tax is withheld from their pay, taxpayers can use the IRS withholding calculator. See Making Work Pay for more.
  
  
• First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.
  
  
• Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax.
  
  
• Enhanced Credits for Tax Years 2009, 2010. Find details on the earned income tax credit, additional child tax credit and the American Opportunity Credit, a new higher education benefit.
  
  
• Increased Transportation Subsidy. Employer-provided benefits for transit and parking are up in 2009.
  
  
• Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.
  
  
• $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.
  
  
• Energy Efficiency and Renewable Energy Incentives. See what individuals can do to reap tax rewards.
  
  
• Health Coverage Tax Credit. The credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

Some of the provisions of the law primarily affect businesses.

• Making Work Pay Tax Credit. Businesses should use the new withholding rates for their employees. For pension plan administrators, new optional withholding procedures are available to supplement the February withholding tables.
  
  
• Work Opportunity tax credit. This newly-expanded credit adds returning veterans and "disconnected youth" to the list of new hires covered by the credit that businesses may claim. Certification by the state work force agency is required.
  
  
• COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.
  
  
• Energy Efficiency and Renewable Energy Incentives. See what businesses can do to reap tax rewards.
  
  
• Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions, is now available.
  
  
• Municipal Bond Programs. There are new ways to finance school construction, energy and other public projects.

2008 and 2009 Tax Returns

The law could affect some 2008 tax returns due in 2009. However, most of the changes in ARRA will affect 2009 individual tax returns filed next year and due April 15, 2010.

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