Pension is being counted as earned income for Social Security Taxes

[ldruth61]

Why is turbo tax listing my pension as earned income and taxing my social security benefits at 85%?

It's not supposed to be considered earned income per Social Security Admin

[DoninGA]

Go to this IRS Publication 915 and review the worksheets provided.  There is no reference to earned income.  It is taxable income as stated on the worksheet - Combine the amounts from Form 1040 or 1040-SR, lines 1z, 2b, 3b, 4b, 5b, 7, and 8

The Form 1040 Lines 4b and 5b is the taxable amount of an IRA or Pension distribution.

https://www.irs.gov/pub/irs-pdf/p915.pdf

[ThomasM125]

You are correct, pension distributions are not earned income but they do factor into the amount of your social security benefits that are taxable. The income used to determine the amount of your social security benefits that are taxable includes unearned income. You can learn more from this Intuit Article.

[Opus 17]

You may be thinking of something different:  If you start taking your social security benefit before full retirement age, having too much earned income may reduce the amount of social security benefit you receive in the next year.  This reduction goes away when you reach your full retirement age, and does not apply to unearned income.

This is completely separate from the calculation of how much of your benefit is taxable.  

[ldruth61]

I understand it's taxable income per the IRS, but per the Social Security Admin It's not supposed to count towards income related to Social Security Taxes and in turbo tax this are taxing it at 85%

[ldruth61]

unearned income does not count. Where to you get your information?

[ThomasM125]

Per this article from the IRS, pension income does count when determining the taxable portion of your benefits: 

[ldruth61]

Read this. Says just the opposite of your link

Benefits Planner: Retirement | What Income is Included in your Social Security Record? | SSA

[DoninGA]

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@ldruth61 wrote:

I understand it's taxable income per the IRS, but per the Social Security Admin It's not supposed to count towards income related to Social Security Taxes and in turbo tax this are taxing it at 85%

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No, the SS benefits can be taxed at Up To 85% depending on the amount of other taxable income being reported.

[Opus 17]

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@ldruth61 wrote:

Read this. Says just the opposite of your link

Benefits Planner: Retirement | What Income is Included in your Social Security Record? | SSA

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You are confusing two different concepts.

Pensions and other unearned income does not give you social security credit (does not go on your social security record to determine your benefit.). Only compensation from work goes on your social security history to build credit for your benefit. 

That is completely separate from the calculation of how much of your benefit is taxable.  That calculation does include all your income, including pensions.

[DoninGA]

@ldruth61 You are now referring to different things concerning SS.  Your first question was concerning the benefits be taxed.  Now you are referring to paying Social Security taxes on income.  The two are totally separate.

[ldruth61]

No I am not confusing it. Where did I mention anything about SS credits. My question was and always has been that PENSIONS DO NOT COUNT AS EARNED INCOME FOR SS TAXES, so why is Turbo tax adding tax on my SS at 85% with pension as my only other income.

[ldruth61]

NO I am not confusing it. You are. What's the difference between benefits being taxed and taxes on SS benefits? Your comment make 0 sense.

[ldruth61]

Yes, pension is taxable income but not when taxing SS benefits. It does not count as earned income towards having your SS taxed

[Opus 17]

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@ldruth61 wrote:

Yes, pension is taxable income but not when taxing SS benefits. It does not count as earned income towards having your SS taxed

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Please review IRS Publication 915, specifically:

Are Any of Your Benefits Taxable?

To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with the total of:

1. One-half of your benefits; plus

2. All your other income, including tax-exempt interest.

Exclusions.

When making this comparison, don’t reduce your other income by any exclusions for:

• Interest from qualified U.S. savings bonds,

• Employer-provided adoption benefits,

• Interest on education loans,

• Foreign earned income or foreign housing, or

• Income earned by bona fide residents of American Samoa or Puerto Rico.

https://www.irs.gov/publications/p915#en_US_2024_publink100097869

It does not say earned income, it says all other income.

If you continue to disagree, feel free to try and find a different tax preparer who will calculate it your way.

Cheers.