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Taking Care of Mom and Dad: Income Tax and Benefits

Some people who receive Social Security benefits are required to pay federal income taxes on them. This will apply to your parents if they also have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that they have to report on their tax return) in addition to their Social Security benefits. No one pays taxes on more than 85 percent of his or her Social Security benefits and some pay on a smaller amount, based on the following IRS guidelines:

If your mom files a federal tax return as an individual and her combined income (the sum of her adjusted gross income plus nontaxable interest plus one-half of her Social Security benefits) is between $25,000 and $34,000, she may have to pay income tax on 50 percent of her Social Security benefits. If her combined income is above $34,000, up to 85 percent of her Social Security benefits is subject to income tax; and If your parents file jointly, they may have to pay taxes on 50 percent of their benefits if they have a combined income (the sum of their adjusted gross income plus nontaxable interest plus one-half of their Social Security benefits) between $32,000 and $44,000. If their combined income is more than $44,000, up to 85 percent of their Social Security benefits will be taxed.

If your parents are still married and file separately in their tax returns, they probably will pay taxes on their benefits.

Every January, your parents will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits they received in the previous year. In fact, the Social Security agency will send statements out to workers 25 or older, including those that are not getting benefits on their own records yet (these statements go out about three months before your birthday).

Statements do not go out to people age 62 or older who get benefits on someone else's record. So, if your 68-year-old mother is receiving benefits on your father's record, she won't get a statement. The statement that your parents receive in January is useful for determining whether they need to pay taxes on their benefits. It'll help them complete their federal income tax return.

Although your parents are not required to have federal taxes withheld from their Social Security benefits, they may find it easier than paying quarterly estimated tax payments. They can request that federal taxes be withheld from their Social Security when they apply.

If your parents are already receiving benefits or if they want to change or stop their withholding, they need a form W-4V from the IRS. You can download this form from the IRS's Web site at www.irs.gov or you call the IRS toll free at 1.800.829.3676 and ask for the form. Once your parents complete and sign the form, they return it to their local Social Security office by mail or in person.

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