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jjzydel
New Member

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

I started withdrawing Social Security in April and never withheld taxes.  I will definitely owe money on this as I am in high combined income bracket.  I read somewhere that there is no penalty if you just started taking benefits that same year. I that so?
5 Replies
Critter
Level 15

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

Not true ... you may be able to escape a penalty the first year if ...


- 1. You  owe less than $1,000 in tax for the current tax year on your return, after subtracting your withholding and credits. 
 
- 2. And the  withholding and credits on the 2017 return are more than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

TomYoung
Level 13

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

Line 2. here should read "...are MORE than..."
Critter
Level 15

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

😉
SweetieJean
Level 15

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

Critter's answer is correct. You may be thinking of this, which has nothing to do with income taxes:

https://faq.ssa.gov/link/portal/34011/34019/Article/3740/What-is-the-special-rule-about-earnings-in-...

VolvoGirl
Level 15

Is there a penalty for owing taxes on social Security Benefits if you just began taking benefits that year?

First year ss payments.  
There are 2 different things to know about social security. People get them mixed up all the time.

1. Your actual SS checks
If you are over full retirement age your actual ss checks won't be reduced. Otherwise they will actually reduce your payments if you make too much other income in the prior year.  See SS FAQ for working after retirement
https://faq.ssa.gov/link/portal/34011/34019/Article/3739/What-happens-if-I-work-and-get-Social-Secur...

If you are under full retirement age for the entire year:
You can earn $16,920 gross wages or net self-employment and not lose any benefits in 2017.
( $15,720 in 2015/2016).
We will deduct $1 in benefits for every $2 earned above $16,920.

The first year exemption is………In the year you reach full retirement age You can earn $41,880 gross wages or net self-employment prior to the month you reach full retirement age and not lose any benefits.  We will deduct $1 in benefits for every $3 earned above $41,880 (for 2015) until you reach full retirement age.  When you reach full retirement age, you would receive your full benefit no matter how much you earn.
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