Over 65 with only SSI income and two small RMDs from two retirement accounts and not sure about filing/paying taxes

[Nate402]

Good day. I am 70 years old and retired. In 2019, my income consisted of the following:

a) SSI payment of $10,000 (for the year), 

b) Required Minimum Distribution (RMD) from my 401(K) of $1,500 (for the year), 

c) RMD from my Group Variable Annuity/403(b) Tax Deferred Plan of $500 (for the year), and

d) A few hundred dollars interest from a savings account.

I have two questions:

1) I’ve read that individuals over 65 don’t need to file and pay taxes if their Earned Income is less than the standard deduction, which is $12,200 for 2019. I also read that SSI payments do NOT count towards Earned Income. If that’s true, since my two RMDs from my 401(K) and Group Variable Annuity/403(b) Tax Deferred Plan is less than the standard deduction, does this mean I do NOT need to file taxes, thus NOT pay any taxes?

2) For the RMD of $1,500 from my 401(K), my financial institution gave me the choice to withhold state and federal taxes, which I did. The 1099-R form from my financial institution showed State withholding 5% or $75, and Federal withholding 10% or $150.

If I don’t need to file and pay any taxes (based on the details I provided in my first question), did I make a mistake by choosing the option to withhold taxes from the RMD of my 401(K)? My financial institution did provide an option NOT to withhold taxes. I wasn’t sure if I must pay taxes on the RMD from my 401(K) no matter what because of the way a 401(K) works, or if my scenario of my total Earned Income being less than the standard deduction comes into play, thus I should NOT have chosen to withhold taxes and essentially lost that money.

Thank you!!

[VolvoGirl · Accepted solution]

First of all nothing you have is earned income.  Earned income is only W2 wages and a Net Profit from self employment.  But your income is less than the Standard Deduction.  And actually since you are over 65 you get an extra 1,650 Standard Deduction making it 13,850.  Are you Single?

You only need to file to get back the withholding .  So for the future you can change the withholding to zero and then not need to file.

I assume you get Social Security?  That is not ssi.  ssi actually stands for supplemental security income.  It is different than SS.  You don't get a SSA-1099 for ssi and you do not report ssi on your tax return.

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

[Nate402]

Hi! Thank you for the fast reply!

To answer your questions:

1) Yes, I am single.

2) I mistakenly wrote SSI. I did not receive SSI. I meant to say Social Security. My Social Security was $10,000 in 2019. I did receive an SSA-1099 for my Social Security, and box 5 (net benefits for 2019) was the $10,000. My apologies for writing that wrong. Does this change anything?

So it sounds like I should file for 2019 due to me mistakenly choosing to withhold taxes for my 401(K) RMD. But for 2020, as long as everything stays the same, and I adjust my RMD to not withhold taxes, I won't need to file taxes for 2020. Does this sound accurate?

Thank you!

[VolvoGirl]

Yes file 2019 to get back the withholding.  Do you get monthly checks?  You might already have withholding taken out for 2020 so you might need to file next year too.  But yes give the RMD a new W4P to stop the withholding.

[Nate402]

Thank you!! I chose to get a lump sum payment at the end of the year, so I don't think I will get the RMD until November 2020.

[Nate402]

Hi again. I'm not sure if you will see this, but I had one more question. I just noticed for the 401(K) RMD that I cannot choose NOT to withhold my state taxes. I know I should choose to not withhold federal next year, but I don't have a choice for state, which is Massachusetts. It withholds state tax automatically without giving me a choice not to.

Does that mean the state just gets to keep that money if I don't file my taxes next year? That seems unfair. I guess I could file to get the $75 back (well actually only $50 after paying Turbo Tax $25 to file state.) But is this common for states?