No, you are not required to withhold money during the year form your social security checks as long as the tax balance at the end of the year is less than $1,000. Otherwise, if taxes are not withheld, you may want to consider paying estimated taxes four times a year, instead.
Not all of the Social Security is taxed. To know what to expect, you may want to consider the 2021 tax brackets to project what balance will be owed for next year.
For more information, see: Is my Social Security income taxable?
Thank you for your reply. Bottom line, I owe way too much in tax. Well above $1000 (almost $7k).
Transitioned too muck money ($55K) from IRA to Roth IRA without withholding any money to pay tax. (Bad advice from someone) I am able to pay from other savings however now it appears I may be into penalty territory. Any way to Avoid Penalty? How do I calculate penalty? Can't return any money to source IRA as money is tied up in Roth IRA. Any ideas Please?
You may be able to avoid the penalty. Let the IRS calculate the penalty then reply with a request for abatement. You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:
- You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You have paid, or arranged to pay, any tax due.
In your response to the penalty notice, indicate you are requesting abatement under the IRS First Time Penalty Abatement program. Here is a link for more information.