We are fortunate to be living in Las Vegas because we only have one tax return to file yearly. As I mentioned in my previous blog, even if you are not required to file a tax return, it may be a good idea to file anyway. Senior citizens who file can take advantage of available tax credits and will most likely get a refund.

If you are not sure of how to take the credits and you are over the age of 60, there are trained volunteers (often retired individuals) who receive grants from the IRS to provide counseling and prepare your basic Federal tax returns free of charge. You can access this service through the IRS or through AARP. 

Calculating Your Eligibility for Elderly or Disabled Tax Credit

IRS Publication #524 which can be found on the irs website at http://www.irs.gov/ explains how to get credits for both single and married people. The following are general guidelines for eligibility:

·        If you were 65 or older at the end of the tax year.

·        If you were retired or on permanent/total disability

·        If you reached the mandatory retirement age before the end of the year

·        If you received taxable disability benefits during the year

·        If Social Security was your only source of income and you did not exceed the non-taxable income amount that Social Security allows for your filing status (i.e., single or married).

Do Social Security Recipients Need to File Taxes?

Tax Time is Just Around the Corner!

With tax time upon us, most of my posts will focus on Social Security income and taxes.

Many Social Security recipients are confused on this issue. I have spoken with several people who think that they are exempt from paying any taxes at all, or don't need to file because their only income is from Social Security. They also believe that they are not required to pay taxes on additional income unless that income is in excess of the additional amounts that Social Security allows for individuals and couples. Unfortunately that is not entirely true.

Depending upon the state in which you live, you may be required to pay state and/or local taxes on your Social Security income. However, there are many states do not require Social Security recipients to pay local taxes. I suggest you check with your state tax board before making that assumption. If you are required to pay any type of state or local taxes, keep in mind that the Social Security Administration is only authorized to withhold Federal taxes. In determining whether or not Social Security recipients need to pay taxes on their income, the IRS states that individuals can make up to $25,000 yearly (in Social Security benefit payments, plus any other income); and couples can earn up to $32,000 yearly without being required to pay taxes.

If you are under the retirement age of 65 you can earn up to $14,160 per year in excess of your Social Security benefit payment amount as an individual; and $37,680 per year for couples without any reduction to your Social Security benefit amount. Any earned amounts in excess of those mentioned above will result in a reduction in the amount of your Social Security benefit by $1 for every $2 earned. For example, if are an individual and you earn $1,000 over the $14,160 allotted for individuals, that brings your additional income to $15,160 and your Social Security check will be reduced by $500.

Any income that is derived from self-employment is subject to taxes. Profits from self-employment in excess of $400 yearly must have Social Security and Medicare taxes deducted and must be reported when you file your personal income tax return.

With all the tax credits available, it’s a good idea to file a yearly tax return even if none of the above scenarios apply to you. Last year, with Social Security benefits and a couple of months of temporary work (which came to around $7,000), I got a return of $822; and received more than $500 the year before.

Your Social Security and Taxes

Someone mentioned to me the other day that she owed back taxes to the IRS, but wasn’t concerned because she was on Social Security--and no one could touch that.

To the contrary… unlike creditors and others to whom you may owe money, the IRS can… and does… take money from your Social Security payments to satisfy payment of back taxes. If you have income in addition to your Social Security, that money is not protected and the IRS can take 100% of it if you also collect Social Security.

According to Title III Section 6(a)(1) of the Fair Labor Standards Act of 1938; if you are not on Social Security and your only income is from working, the first 75% of your wages are protected. Creditors can take up to a maximum of 25% of your weekly earnings after taxes and deductions have been made. That 25% is considered by the IRS to be disposable income. If you are a wage earner who owes back child support or alimony, up to 50% of your salary can be garnished, even if you have re-married and currently support a family; and as much as 60% if you remain single.

As of May, 2001 Social Security benefits became subject to garnishment by other government agencies for the first time in history. While private creditors cannot garnish Social Security benefits, the Federal Government can deduct payments from retired people who have defaulted on VA mortgages, student loans, small business loans, disaster loans and back taxes. In those cases, only the first $750 of Social Security benefits are protected.

Filing bankruptcy will put a temporary halt to IRS levies and garnishments but bankruptcy cannot be filed to eliminate debt to the IRS. Once the bankruptcy reaches its final determination the IRS can re-attach your income--including Social Security benefits.


Beware of the 1099C
Creditors now have another weapon to use against you if they are unable to collect on a debt. The 1099C form is for debts in excess of $600 that the creditor writes off as a loss. The IRS allows creditors to file a 1099C which shows the amount you may have borrowed as income. By doing this, creditors can force you to pay taxes on the money. The worst part of this is that the creditor does not have to send you a copy or give you prior notification of their intent to file a 1099C.


To counteract the 1099C, there is a form called an “Offer in Compromise” which allows you to make an agreement with the IRS to make payments on back taxes owed.  Many times, it is cheaper to pay the taxes on the money, than pay the default amount. If you do not own anything of value that can be sold to satisfy any outstanding taxes, skip the Offer in Compromise and file a form 433F with the IRS showing that you have no assets and that Social Security is your only income. You'll find those forms on the IRS website at http://www.irs.gov/.

What are we? Stupid?

This year we will elect a new president. Obama doesn't stand a chance of getting re-elected. I've listened intently to the bile some of these politicians are spewing and it is freightening.

Politicians, like Mitt Romney would have us believe that the one-percent who control the wealth of this country (of which he is one) are the ones who will help us recover from the recession because they are the job creators. They suggest that the one-percent will create a sufficient number of jobs for the remaining ninety-nine percent to again be employed and return the status of this great nation to its former glory... With the proviso that we don’t require them to pay their share of the taxes that the ninety-nine percent of us are required to pay, unemployed or not.

Are we really that stupid? I find it disturbing that so many people are falling for this rhetoric. We have been in this recession for nearly five years and the rich have had tax breaks for longer than that. If these are the people who create the jobs, where are those jobs--and why did people lose their jobs in the first place?

Unemployment has increased significantly since 2007. The powers that be tell us that things are getting better because the numbers show that there are fewer people receiving unemployment benefits. Really? Maybe it’s because the individuals who were getting unemployment have exhausted their benefits and are dropping off the unemployment rolls, causing a decrease in the numbers. The millions of people who have lost their jobs over the past 5 years are, for the most part, still unemployed because not nearly enough jobs have been created to put them all--or even most--back to work. Twice a year, we have thousands of young people who are graduating and joining the work force, essentially squeezing out the older, experienced workers. These inexperienced, young people have never worked before and unquestioningly accept lower salaries and limited benefits. Minimal benefits is fine when you’re young and rarely get anything more than a hangover or a cold. They have no problem with smaller salaries since they can continue live at home with their parents, have fewer expenses or responsibilities than those of their older counterparts. Don't fall for it, unemployment is not getting better, it's getting worse. The homeless problem is growing. So many people have begun receiving welfare, medicaid and food stamps that some of these programs were actually suspended for a time in many states.

And... what will we do about it? Elect another politician with pretty words who says what we want to hear, but once elected does nothing. Or will we break from the status quo this time and get someone who is as outraged at the state of this country as the rest of us are? Probably not...