Can turbo tax properly account for required minimum payments and social security taxes?

[hlamuth]

I am concerned about the social security tax torpedo when I start to take required minimum distributions.

[xmasbaby0]

Yes----TurboTax can calculate your taxes when you are taking your RMD and getting Social Security benefits----a very common situation.

You get a SSA1099 for Social Security and for taking money from your retirement account you will get a 1099R.

Go to Federal> Wages & Income>>Retirement Plans and Social Security  (SSA1099 and 1099RRB) to enter your SSA1099.

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable. 

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2019 it was $17,640— for 2020 it was $18,240; for 2021 it was  $18,960.  For 2022 it was  $19,560  —  for 2023 $21,240)  For 2024, $22,320.

After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.  If you work as an independent contractor then you will pay self-employment tax for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2023 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 11 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont  These states offer varying degrees of income exemptions, but two mirror the federal tax schedule: MN and VT.

The tax laws for 2024 will change——for  tax year 2024 Missouri and Nebraska will no longer tax SS

[VolvoGirl]

All you do is enter the 1099R you will get for the RMD.  Then it will ask you if it is the RMD and how much.  But the RMD info doesn't go on your tax return unless you didn't take out the full RMD and need to pay a penalty.  Are you asking about the Social Security increase for Medicare deduction the IRMAA?  There's nothing you can do about that.  It is based on all your income.  

If you do get SS......Up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

[Texas Roger]

You can actually somewhat control the IRMAA on your medicare costs by taking some or all of your RMD as a Qualified Charitable Distribution (QCD). A QCD reduces the total amount of income that the IRMAA is based on. 

[hlamuth · Accepted solution]

Good answer!! I will have to begin taking an RMD this year and just discovered that the "torpedo" trap exists. I want to use Turbotax to examine various scenarios including moving 401K money into a Roth IRA to "avoid" certain taxes. I have used Turbotax for decades and never questioned how its algorithms have handled various scenarios I have found myself in. At least the IRS hasn't complained! Now tax avoidance has become more important and complicated.

Thanks to you and the others who answered my question.

Regards

[VolvoGirl]

Which "trap" are you referring to?  If you use the Desktop CD/Download program you can do several returns to test in and there is a What-If worksheet you can play with.   Desktop has a Forms Mode where you can see and enter directly into the forms.  And several other features over the Online version.  We can tell you how to transfer an Online return into the Desktop program.  Oh and you can buy a lower version.  All the Desktop programs have the same forms. You just get more help and guidance in the higher versions. 

You can buy the Desktop CD/Download program here,

https://turbotax.intuit.com/personal-taxes/cd-download/

Or buy it in stores or online like Costco, Walmart Amazon etc.