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Can your program distinguish social sec benefits not being taxed during 1st year when someone earns income first six months, not after they begin receiving benefits?

We were told by Social Security that during the first year of retirement, our benefits would only be subject to taxes after we retired. In other words, Jan - June would not count toward the amount permitted to be earned for the year. July - December would only count if we earned more that the monthly amount allowed. We did not earn income after July 1. How do I enter this into TurboTax?

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Level 15

Can your program distinguish social sec benefits not being taxed during 1st year when someone earns income first six months, not after they begin receiving benefits?

TTX handles it quite well...but you're misinterpreting what SS said.

Your SS is still subject to Income taxes the first year...it's just that...if you are under full retirement age, SS will not reduce your SS monthly benefits during that first year.  That's something else entirely..

"Special rule for the first year you retire Sometimes people who retire in mid-year already have earned more than the annual earnings limit. That’s why there is a special rule that applies to earnings for one year,  usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you’re retired, regardless of your yearly earnings."

(page 4:  https://www.ssa.gov/pubs/EN-05-10069.pdf)

Nothing special to do that first year, you just put in all your income and your SSA-1099, and then SS will later get their own copy of what you filed.

But if you are still below full retirement age the next year (and continue working), you do need to talk to SS about that because they may need to reduce your monthly SS payout for that next year....or the next according to how much you are earning that year  (Meaning W-2 or self-employment income)


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2 Replies
Highlighted
Level 15

Can your program distinguish social sec benefits not being taxed during 1st year when someone earns income first six months, not after they begin receiving benefits?

TTX handles it quite well...but you're misinterpreting what SS said.

Your SS is still subject to Income taxes the first year...it's just that...if you are under full retirement age, SS will not reduce your SS monthly benefits during that first year.  That's something else entirely..

"Special rule for the first year you retire Sometimes people who retire in mid-year already have earned more than the annual earnings limit. That’s why there is a special rule that applies to earnings for one year,  usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you’re retired, regardless of your yearly earnings."

(page 4:  https://www.ssa.gov/pubs/EN-05-10069.pdf)

Nothing special to do that first year, you just put in all your income and your SSA-1099, and then SS will later get their own copy of what you filed.

But if you are still below full retirement age the next year (and continue working), you do need to talk to SS about that because they may need to reduce your monthly SS payout for that next year....or the next according to how much you are earning that year  (Meaning W-2 or self-employment income)


____________________________

View solution in original post

Highlighted
New Member

Can your program distinguish social sec benefits not being taxed during 1st year when someone earns income first six months, not after they begin receiving benefits?

Thank you! Not the answer I was hoping for, however, I understand this better now.