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“Boring” is a word that frequently comes to mind when people think about doing their taxes. But if you’re a retiree living off a fixed income, tax time can also be stressful. You probably don’t have an employer withholding money for taxes upfront, so you may actually owe the government. And the IRS might be after more than just your retirement account withdrawals.
The federal government taxes Social Security benefit taxes as well. President Trump has vowed to eliminate these taxes, but for the time being, they’re still on the books. Hopefully, if you owe them, you have the savings you need to pay your tax bill when you file your return. If not, there are steps you can take to keep the IRS happy without breaking your budget.
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How Social Security benefit taxes work
Not everyone owes Social Security benefit taxes. It depends on your provisional income, which is your adjusted gross income (AGI), plus half your annual Social Security benefit, and any nontaxable interest. You may have nontaxable interest if you own municipal bonds.
The following table shows the Social Security benefit tax thresholds for your provisional income and marital status:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Below: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Exceeds: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Source: Social Security Administration.
The above table helps you identify what percentage of your benefits you could owe ordinary income tax on. Your tax professional or tax filing software will lump the appropriate amount of your benefits in with your other taxable income when determining how much you owe the government.
What to do if you can’t pay your tax bill
If you owe the government and you cannot afford to pay taxes, there are a few things you don’t want to do. First, you don’t want to delay filing your return until you’ve gotten the money together. There’s a 5% monthly failure-to-file penalty that can cost you up to 25% of your taxes owed. Filing your return by the April 15, 2025 tax deadline, even if you can’t pay your bill, will help you avoid this extra cost.
Second, you don’t want to ignore your tax bill in the hope you can outrun it. Most creditors can’t garnish your Social Security checks, but the IRS can. If you don’t pay your taxes, it can just take a chunk of your benefits every month until it’s gotten what it’s owed.
What you want to do is get ahead of the problem. First, pay as much as you can upfront, even if it’s not the full amount. This will reduce your outstanding balance, which will be subject to a 0.5% monthly failure-to-pay penalty, up to a maximum of 25% of the unpaid amount.
Next, consider applying for a payment plan on the remaining balance. You can apply for one of these online. It will enable you to spread your payments out over time so they’re more manageable. As long as you stick to the terms of the payment plan, you won’t have to worry about the IRS hounding you for the rest of your bill.
You could also try an offer in compromise. This is where you tell the IRS how much you can afford to pay toward your tax bill. It will look at your income, expenses, and other factors when deciding whether to accept your offer. If it does, it’ll forgive the remainder of your tax debt.
Finally, you can request that the IRS temporarily delay collection of the unpaid amount if paying it would prevent you from meeting your basic living expenses. This enables you to delay the tax bill until you’re on a better financial footing.
If you’re not sure which is the best option for you, consult with a tax professional. You could also reach out to the IRS directly to discuss your options.
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