Retirement: Pension, Annuities, Social Security and Railroad Retirement Benefits Flashcards
What determines whether social security benefits are taxable?
- Filing Status
2. Provisional Income
What is MFSLT?
Married Filing Separate taxpayer that lived together some during the year.
What is the formula for Provisional Income (PI)?
Gross Income \+ Tax Exempt Interest \+ US Savings Bond Interest \+ Foreign EI and housing allowance \+employer paid adoption benefits \+1/2 Social Security Benefit \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Provisional Income (PI)
What are the Tier 1 Threshold Amounts/Base Amount (BA)?
MFJ $32,000
S, HH, QW, MFS $25,000
MFSLT 0
What are the Tier 2 amounts/ Adjusted Base Amounts(ABA)?
MFJ 44,000 (32,000 + 12000)
HH, S, QW, MFS 34,000 (25,000 + 9000)
MFSLT 0
When are 50% of Social Security Benefits taxed?
PI > BA (Tier 1 Threshold) AND
PI < ABA (Tier 2 Threshold)
When are none of a taxpayers social security benefits taxed?
PI < BA And
When are up to 85% of Social Security Benefits taxed?
- PI > BA and ABA
- MFSLT
- Non-Resident Alien
How much of your social security is taxed if you are MFSLT?
85%
How much social security income is included in GI calculation to determine if a taxpayer meets the requirement to file a tax return?
1/2 social security income is included even if a taxpayer will not be taxed on any of their social security benefit
If a taxpayer receives one check that included a social security benefit for the taxpayer and his child. Whose return is the income reported on?
Social Security income is included on in the TI of the person who has a right to the benefits.
The parent would report his benefits on his return.
The child would report her benefits on her return.
How does a repayment of social security benefits by the taxpayer affect the calculation that determines how much social security benefit is taxable?
Gross Social Security benefits 2019 (1099 box 3)
- Repayments made in 2019 (1099 box 4)
______________________________________
Net Social Security Benefit used for the calculation (box 5)
How is your tax return affected if your net social security is zero or negative?
1, none of your social security benefits are taxable
2. IF > -3000 then you be able to deduct part of it
How much of a non-resident alien’s social security benefits are taxable? What tax rate is used?
- 85% taxable benefit
2. 30% tax rate
What situations required special worksheets for determining the taxable portion of social security benefits?
- Deductible contributions to an IRA
- Exclusions that are included when calculating how much of a TPs social security benefit is taxable
- Lump-Sum payment received from the SSA (not inherited)
How is a Railroad Retirement benefit check divided and how is the income treated?
Tier 1: Equivalent to Social Security benefits (SSEB)
Tier 2: Not Equivalent to Social Security benefits (NSSEB) are treated like pension income
What tax forms are sent to the taxpayer for Railroad Retirement benefits?
- RRB-1099: Tier 1 (SSEB)
2. RRB-1099R : Tier 2 (NSSEB)
How are railroad retirement benefits taxed for:
- 60-62 years old
- 62+
- 65+
- 60-62: both tiers are taxed like a pension
- 62+ : SSEB: like social security benefits NSSEB: like a pension
- 65+ : Medicare premiums payments are deductible
What percentage of a Social Security Lump-Sum distribution to a beneficiary is taxable?
None
How do you calculate the tax for a social security Lump-Sum payment from SSA? (3 steps)
- WS1: Calculate 2019 with repayment from an earlier year included in 2019 PI
- WS 2: Calculate earlier year with only earlier year GI and repayment.
- WS #: Make election based on the numbers to adjust earlier year return
If PI > Tier 1 and
PI < Tier 2
How do you calculate the tax?
Tax is smallerof:
1. 50% * excess of Tier 1
or
2. 50% * Social Security benefit
Excess of Tier 1= PI - Tier 1 Threshold
How is Excess of Tier 2 calculated?
Excess of T1 - Step up to T2 (12000 MFJ/ 9000 all others) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Excess T2 *MFSLT = 0 for both Tier 1 and Tier 2
How do you calculate Excess of Tier 1 amount?
Provisional Income (PI)
- T1 Threshold amount (BA)
________________________
Excess of T1
How does a deductible IRA contribution affect Provisional Income?
Provisional Income is reduced by the amount of the deductible contribution.
