Q: Mr. W, of Chattanooga, writes: “I receive Social Security disability payments. I have been totally disabled since August 2006. My wife works and has a yearly income of $60,000. We file a joint tax return.
The accountant who prepared our taxes last year claimed it as taxable income. Since I do not pay taxes on this money, I did not think it was taxable. I need to decide if I should claim it as I will prepare ours this year. The Social Security regs do not provide a definitive answer as to whether disability insurance is taxable.”
A: Some people who get Social Security disability benefits will have to pay taxes on their benefits. Less than one-third of our current beneficiaries pay taxes on their benefits.
You will have to pay federal taxes on your benefits if you file a federal tax return as an “individual” and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000.
Call the IRS toll-free at (800) 829-3676 and ask for IRS Publication Number 915, “Social Security and Equivalent Railroad Retirement Benefits.” People who are deaf or hard of hearing may call a toll-free number, (800) 829-4059.
Q: "Will Social Security beneficiaries receive a rebate from the economic stimulus package approved by Congress?"
A: The president has signed the economic stimulus bill. The IRS will begin sending stimulus payments, popularly known as tax rebates, in May 2008.
To find out if you are eligible for a stimulus payment or if you have other questions about the stimulus bill, please go to the IRS Web site at www.irs.gov. The IRS Web site has the best and most up-to-date information to answer your questions about the stimulus payment. If you prefer, you may call IRS on its toll-free number at (800) 829-1040.
Social Security beneficiaries, who are filing a 2007 tax return only to obtain the stimulus payment, will not need a replacement Form 1099 for IRS to determine if they are eligible to receive a stimulus payment. An estimate of Social Security benefits received in 2007 is sufficient.
Q: Mrs. A, from Cleveland, Tenn., writes: “I am soon to be 57 years old. At this time, I would hope that I would be able to retire at 62. If I start paying more into Social Security now (have more withheld from my weekly check), would I be able to collect more at retirement? Or is what I receive at retirement based on my total salary over a certain period of time?”
A: When you have wages or self-employment income that is covered by Social Security, you pay Social Security taxes each year up to a maximum amount that is set by law. That amount has changed frequently over the years.
The maximum earnings amount for 2008 is $102,000 and was $97,500 in 2007. The 2008 contribution rate, also known as the FICA tax rate, is 7.65 percent for employees and 15.30 percent for self-employed people. Social Security benefits are based on earnings averaged over most of a worker's lifetime.
Get answers to your Social Security questions each Thursday from Social Security District Manager Eleanor Jones. Submit questions to her attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at jvass@timesfreepress.com.
