What Do I Need To Know About My Disability Benefits and Taxes
What Do I Need To Know About My Disability Benefits and Taxes
Social security payments come to you without any taxes deducted but this does not necessarily mean that you do not have to pay taxes on them. Just as you pay taxes out of your paycheck from a regular employer, you have to pay taxes from your social security benefits. The only difference between the two is that employers are required to automatically withhold your taxes and the Social Security Administration does not. It would be a smart idea to set some of your social security benefit payment away to pay for the taxes.
The amount of taxes you may have to pay is determined by how much household income you make in a year. If you file your taxes individually and make more than $25,000 a year, you will be required to pay taxes on your social security benefit payments. If you file your taxes jointly and make more than $32,000 in a year, you will also be required to pay taxes on any social security benefit payments received. Social Security does not automatically deduct taxes out of your benefit payments the way regular employers do, but if you know that you are going to make enough money to have to pay taxes on your social security benefit payments, you need to contact the Social Security Administration Office and ask them to automatically deduct taxes. When requesting to have these federal taxes withheld, you will be asked if you want seven, ten, fifteen, or twenty five percent withheld for tax related reasons.
The social Security Administration can only withhold federal taxes from your social security payments and does not have the authority to withhold any state or local taxes. Your chance of having taxable disability benefits is slim to none. This is because social security is usually issued to those with low income and is based on financial need. If you qualify for social security disability benefit payments, it is unlikely that you exceed the income limit to not be eligible for tax free benefits, yet it is possible. It is better to go ahead to automatically withhold federal taxes on your disability benefits, especially if you already know you will make more than the allowed amount to not pay any taxes on them.
Do not neglect to file your social security income because you make too much and have to pay taxes on your disability payments. The Internal Revenue Service will contact you and let you know that you owe taxes that you have not paid. Remember to contact the Social Security Administration Office at the end of the year, or beginning of the New Year, to request a form 1099 to report your disability earnings on your taxes. Not reporting these earnings can put you in debt with the Internal Revenue Service, and when that happens, they will garnish your regular income wages and possibly take possession of your assets. They are not allowed to garnish any of your benefit payments.
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