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A large number of retired individuals are back in the workforce. In addition to earning a salary, these individuals may also be receiving Social Security benefits. Depending on the individual’s age, benefits may be reduced and included in the recipient’s gross income.
Taxpayers at and above full retirement age can continue to earn unlimited amounts without any reduction in Social Security benefits. Full-retirement age was 65 for many years. However, beginning with 1938 birthdates or later, that age gradually increases.
If you were born January 2, 1956, through January 1, 1957, then your full retirement age for retirement insurance benefits is 66 and 4 months. If you work, and are full retirement age or older, you may keep all of your benefits, no matter how much you earn. If you’re younger than full retirement age, there is a limit to how much you can earn and still receive full 2 Social Security benefits. If you’re younger than full retirement age during all of 2018, the social security administration will deduct $1 from your benefits for each $2 you earn above $17,040.
If you reach full retirement age during 2018, $1 will be deducted from your benefits for each $3 you earn above $45,360 until the month you reach full retirement age.
A portion of Social Security benefits is included in the gross income of a recipient whose total income exceeds applicable base and adjusted base amounts. The base amounts and adjusted base amounts vary with the filing status of the recipient.
Since income tax is not withheld on Social Security, you may need to pay estimated tax. Your tax professional can help you determine if you should pay individual estimated tax. Additionally, even though Social Security benefit payments are not automatically subject to withholding, a taxpayer may request to have federal income tax withheld from them.
In addition to contacting an expert, the Social Security Administration has prepared and excellent brochure on this topic. Don’t wait to ask questions. Finding out the hard way how Social Security payments have affected your tax positions, either now or in the future, can be nuisance.