Social Security Benefits and Tax Implications 2020: As long as you work you should ensure that some of your earnings should be saved for your retirement, in case of disability, financial assistance to your dependents and after benefits for working long run in case of a disability after 65 years.
Non reporting social security benefits on your tax returns will lead to penalties from the IRS, when a benefit is paid the payer will update the information with the IRS that’s how the IRS has the information.
This article will help you to understand the types of social security benefits and tax implications for the tax year 2020.
Social Security and Medicare Taxes
Residents and Citizens are subjected to The Social Security and Medicare Tax and the tax is calculated on the basis of the wage base limit, and both the taxes have a different tax rate.
Social Security Tax Rate:
What Is The Percentage Of Social Security Taxes?
For the tax year 2020 employee and employer contribution for Social Security tax rate is 12.4%, divided among both so each contribution is 6.2%.
Medicare Tax Rate:
What Is The Tax Rate Of Medicare Taxes?
Medicare tax rate for employee and employer contribution is 1.45%, and combined employer and employee contribution is 2.90%. There is no wage limit for Medicare Taxes. If your wages are over $200,000 you need to pay additional Medicare tax at 0.9% tax rate.
Social Security & Medicare Taxes For Nonresident Alien:
I Am A Non-Resident Alien; Do I Have To Pay Social Security & Medicare Taxes?
You are treated as exempt nonresident alien and need not pay social security and Medicare taxes if you are on F, J, M, Q, visa, and did not pass substantial present test or green card test.
Nonexempt nonresidents 85% income is subjected to taxes and the tax rate is 30%, and the residents of Canada, Egypt, Germany, Ireland, Israel, Italy, Japan, Romania, United Kingdom are exempted from United States tax withholding due to tax treaties.
Base Amount Comparison To Figure Out Income
You need to compare with worksheet A to figure out the income amount to compare with the base amount below:
- Your filing status is head of the household, qualifying widow(er) or single the base amount should be $25,000.
- Your filing status is married filing jointly, the base amount should be $32,000.
- Lived with your spouse and decided to file married filing separately your base amount is $0.
How Much Is The Amount of Benefits Are Taxable?
50% of your benefits are taxable, and 85% of your benefits are taxable if any of the below mentioned situation is applicable.
- For the tax year 2020 you lived separately from your spouse and choose to file married filing separately filing status.
- If one half of your total benefits including other income is $34,000 for single or married filing separately. For married filing jointly status income is above $45,000.
What Are The Benefits I Can Deduct On Tax Returns?
You can deduct your disability payments by your employer or insurance company reported on your earlier tax return. If you have received the whole payment as lump-sum from SSA and paid disability payments to employer or insurance company, you can deduct on itemized deductions and if the benefit amount is over $3,000 you can take a credit or deduction.
Types of Social Security Benefits
The social security is of four types with different kind of benefits for you and for your dependents after you demise.
- Retirement Benefits
In order to get retirement benefits you should be at the age of 62 or over and have worked for at least 10 years, salary you earned, disabled, retired, dependents of diseased,
- Disability Benefits
Children with disabilities and adults with limited income can opt disability benefits, age over 65 years with financial limits, work over a long period and salary you earned.
- Survivor Benefits
Your dependents can claim Survivor Benefits after your demise, if you have worked for the long enough and been paying taxes on social security and your spouse, children and parents might be eligible to claim the benefits.
There are other factors involved to get savior benefits like: Age limit, salary, survivor relationship.
- Supplemental Security Income Benefits (SSI)
You can get disability or retirement benefits if you have worked longer, older than 65 years, payable to children or disabled adults.
Adults with disability:
Should not have been married
Should be a state resident of United States
Aged between 18 to 65
Should not have applied for the Social Security Income Benefits
Should be applying for SSI & Social Security Disability Insurance simultaneously.
Required documents for the relevant benefits you need to mail in order to get the benefits approved by the SSA, for assistance in knowing types of documents to apply for the benefits you can email us or log on to our website.
Your Social Security Taxes and Tax Benefits
This article will help you to understand how your taxable benefits are reportable, what is the taxable amount, any benefits are taxable and eligible deductions.
In order to claim social security benefits, you need to compare your filing status with the base amount of:
- Your complete income and tax-exempt income.
- Benefits of your one half and more
Elimination: Do not bring down your other income during comparison, by any of the below exclusions:
- Adoption benefits provided by employer
- Interest by qualified United States bonds
- Income obtained by bona fide residents of Samoa, Puerto Rico or American
- Foreign housing or Foreign earned income
Married couple choosing to file Married File Joint return, need to combine both incomes to ascertain if combined benefits are taxable.
Can Someone Help Me With In-Depth Knowledge On Social Security Benefits Any Time?
If you are the one who missed reporting social security on your last three years tax, you still have a chance to resubmit your tax returns in the form of amended tax returns because, as IRS does regular checks on the filed tax returns as per its ongoing procedure to ensure that the tax payers are filing correct and accurate tax returns, before IRS comes up with any notice you need to take action.
We can help you in amending your already filed any year tax return, and also help you in planning and filing your previous or current year tax returns, we can even help you assess your taxes on social security received benefits. You can count on us throughout the year even after hours.
Ensure that Along with your United States income you are reporting your global income, because IRS would have an idea about your global income, this becomes more important when your renewing your visa or applying for a GC, so please browse our website or you can even call us to know more about us and our free services worth $2,000 today.