Owed Taxes

[AJ252]

I am trying to figure out why my father owes so much in taxes. 70 y/o on SS, but he does still work. He didn’t have to pay taxes on his SS in the past, so why would he owe almost 3K in taxes?

[xmasbaby0]

TAX ON SOCIAL SECURITY

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)

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.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2022 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 13 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.  These states offer varying degrees of income exemptions, but four mirror the federal tax schedule: MN, ND,VT, and WV

[JulieS]

Yes, as xmasbaby0 points out, taxable Social Security can be a shock if you aren't used to it. 

That being said, since this return is very different from his last return, it would be best to compare the returns line by line to figure out exactly what is different. 

There is one change in the tax law that may have played a part. For 2020 and 2021, he may have received up to $1502 in Earned Income Tax Credit (EITC).   

For 2022, the upper age limit has been reinstated, so you must be under age 65 to qualify for EITC for a taxpayer with no qualifying children.

If you need more help resolving this, please respond back with more details about what is on his return and what has changed. 
 

[AJ252]

To clarify, regardless of age, if someone made over $21,240 in 2022, they are required to pay taxes on their SS benefits, correct?

What if they already paid through their job? Total income (job and SS) = $63K. They already paid $6366 in taxes  ($3217 federal tax, $2552 social security tax, and $597 Medicare tax), but they still owe $2306.

Does this sound correct? Paying $8672 in taxes on an income of $63K for a 70 y/o filing as single? 

[xmasbaby0]

@AJ252 If he already had tax withheld from his paychecks, make sure you entered all of that information from his W-2.  That is being calculated by the software--if you entered it.

His age is irrelevant except for the higher standard deduction he gets for being over 65.   No matter how old he is, he will still have to pay Social Security and Medicare.  

[AJ252]

Thank you. I did reply with more information. 

I can't compare line by line as I haven't filed yet until I know the owed tax amount is correct. Unless there is a way to compare line-by-line prior to filing. I have never found a way to do this in TurboTax. You don't get the line-by-line layout until you file. If you know differently, please advise me on how to look at this prior to filing. 

Also, he did get the EITC last year. 

[VolvoGirl]

What they paid from a job doesn't affect if their ss is taxable.  Only the federal withholding in box 2 is subtracted from the total tax.  Does he have any withholding taken out from his Social Security?

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

To see the Social Security Benefits Calculation Worksheet  in Turbo Tax Online version you would have to save your return with all the worksheets to your computer.   Or if you are using the Desktop CD/Download Software you can switch to Forms Mode (click Forms in the upper right) and click on SS in the list on the left side.

Is your Social Security taxable?

https://ttlc.intuit.com/community/income/help/is-my-social-security-income-taxable/00/25600

IRS Pub. 915 on Social Security.  There is a blank worksheet on page 16

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

[VolvoGirl]

Yes you always should review it before you file.  Before filing,  You can preview the 1040 or print the whole return

https://ttlc.intuit.com/community/accessing/help/how-do-i-preview-my-turbotax-online-return-before-f...

[AJ252]

Yes, I have entered everything correctly, but it still shows that he owes almost 3K. 

Does paying $8672 in taxes on an income of $63K for a 70 y/o filing as single sound correct? 

I will never comprehend how taxes are calculated. I have tried to crunch the numbers multiple ways, but it never adds up to me. If you have some sort of simple calculation I can use, that would be great. 

[xmasbaby0]

@AJ252 The rules changed for EIC for 2022.   Your dad is over 65--he cannot get EIC for 2022.

Earned Income Credit—-the rules are back to the “old” rules—

Those under 25 and over 65 without children are not eligible as they were uniquely in 2021.   And you cannot use your income from any earlier tax year to get the EIC for a 2022 return.  There is no “lookback” for 2022.  EIC for 2022 will be based on the income you earned by working in 2022.

https://ttlc.intuit.com/questions/1899157-what-are-the-qualifications-for-the-earned-income-credit-e...

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant

[DawnC]

It could be - look at Form 1040.  Specifically,

Line 15 - Taxable Income - this should be his job income + the taxable portion of his SS (line 6b) - his standard deduction

Line 24 - Total Tax.

Line 25 - Withholdings -  should show the $3217 box 2 amt

Line 33 - Payments including Credits - no EIC this year

Line 34 - Overpayments.

Line 37 - Tax owed

Adjust his W-4 if he is still working.    

[AJ252]

Thank you all for your help.