Tax calculation question

[CP01]

My mom files as a senior - married filing separately. For 2022 she filed with a W-2 around $64K and social security benefits around $ 5K -received a return of $980. Filing the same for 2023 W-2 around $59K and social security benefits around $20K plus – has to pay $1670. Other than the amounts nothing is different with her filing why she must pay this time can someone please explain the difference. I thought the standard deduction was increased. Did Turbotax calculate incorrectly by any chance?

[Bsch4477]

Compare the returns line by line with particular attention to how much social security was taxed. 

[DawnC]

It sounds correct.   There is likely no withholding on her social security, and that is probably why she owes.   If she only had her social security income, none of it would be taxable, but since she is still working, more of her social security is being taxed.   If she is still working, she should submit a new W-4 to her employer and have more tax withheld, so this does not happen again.  

How is social security taxed?  

[xmasbaby0]

Your standard deduction lowers your taxable income. The standard deduction makes some of your income “tax free.”  It is not a refund.  You will see your standard or itemized deduction amount on line 12 of your 2023 Form 1040.

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

You mentioned that your mother files married filing separately.  Does she realize that more of her SS is taxable when she files that way?     AND there was a significant difference in the amount of taxable SS for 2023.    Look at lines 6a and 6b of her Form 1040 for 2022 and 2023.

If you were legally married at the end of 2023 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $27,700 (+$1500 for each spouse 65 or older)  You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit. 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return.

 Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

 If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice since with online, you get one return per fee.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[CP01]

Her W-4 has zero for withholdings don't think there is anything less than that unless I'm not aware of it please let me know if I'm missing something. 

[xmasbaby0]

@CP01 She can change her W-4 to have more tax withheld -- she could even have a flat "extra" amount withheld from each paycheck if she wants to.

https://turbotax.intuit.com/tax-tools/calculators/w4/ https://www.irs.gov/individuals/tax-withholding-estimator

https://www.irs.gov/pub/irs-pdf/fw4.pdf

[CP01]

I didn't know about that. Will greatly appreciate it if you could provide further guidance and sample. Other than the W-4 can she do anything else. Thanks in advance for your help.

[VolvoGirl]

She can have withholding taken out of Social Security.  

W-4V for Social Security withholding

https://www.irs.gov/pub/irs-pdf/fw4v.pdf

[xmasbaby0]

@CP01 As explained earlier --- she is filing MFS---which is often the most disadvantageous way to file.  She may have reasons we do not know for filing separately from her spouse.   But more of her SS is taxable when she files that way, and she also has the other stringent rules regarding itemizing or using standard deduction.   There may be other things she can do----she is still working and earning income, so she may be able to contribute to an IRA---unless she is already doing so and has reached the limit on that. 

[CP01]

She contributes $6000 a year in IRA but doesn't get any credit for it cause of her income. I tried itemizing she will have to pay more. Per Turbotax standard deduction is a better option for her. Anything else she could be doing so 2024 tax could be better...

[VolvoGirl]

It  might help if we knew why she is filing separate.   Is she married?  Filing Joint is usually much better.  If her spouse has no income she can still file Joint.  

[CP01]

Her spouse gets medical and medicare and doesn't want to lose these. He was told if they filed joint he will lose it. He only receives around $4000 a year in social security benefit I guess that will need to be added as income. They been filing separately for years could they now file jointly? 

[ThomasM125]

Yes, they can file jointly even if they filed married-separate in previous years.

[CP01]

Thanks, what about the medical and medicare -will her spouse get affected if they file jointly.

[Vanessa A]

We would be unable to answer that question as it would depend on the rules and regulations for that state and how they handle the medical assistance program.  You would need to contact the department  that handles the medical insurance to find out if it will affect anything.