In reviewing tax forms and instructions for a friend, I once again am amazed by our required tax reporting. It's almost obvious a person needs an accountant to safely complete the IRS tax forms. Otherwise, as some people do, you can provide your numbers to the IRS and they will complete the forms for you.
How to determine taxable Social Security benefits?
From the 1040A instructions, record the amount from your SSA 1099 (line 1). Record half of amount from your SSA 1099 (line 2), determine all of your other Income (line 3) including tax exempt interest (line 4), add up these amounts (line 5). Record and add up Educator expenses and IRA deductions (line 6). If the total Educator expenses and IRA deductions is less than the previously totaled income, then deduct Educator expenses and IRA deductions from the total income (line 7). Determine your filing status (Married, Single, etc.) and record the applicable amount (line 8). If the filing status amount is less than the adjusted total income, subtract that amount from the adjusted total income to come up with a new adjusted total income (line 9). Determine another filing status amount (line 10), subtract that amount from the adjusted, adjusted total income amount to come up with yet another adjusted total income amount (line 11). Determine whether your second filing status amount or your adjusted, adjusted total income amount is smaller, enter the smaller amount (line 12). Enter half of the previous amount (line 13). Determine whether the previous amount or half of your SSA income is smaller. Enter that amount (line 14). Multiply the adjusted, adjusted, adjusted total income amount (line 11) by 0.85. Enter that amount (line 15). Add line 14 and 15 (line 16). Multiply your total SSA income by 0.85. Enter that amount (line 17). Now you have come up with your taxable SS benefits, the smaller of line 16 or line 17. Enter that amount on 1040A, line 14b.
Then there is the "Partially taxable pensions and annuities" section. Luckily, I didn't really have to deal with this. If you do have to deal with this and have trouble, the IRS says "You can ask the IRS to figure the taxable part for you for a $1,000 fee. For details, see Pub. 939." Yikes.
For grins, I went to Pub 939. My favorite section was, "How To Use Actuarial Tables". Did you know, effective July 1, 1986, the annuity tables are unisex? Is that when the sexes became equal?
I just can't wait to start working on our taxes.
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