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Anne
Anne, Master Tax Preparer
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I made $90k in 2009 and for several years before (gross inc.

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I made $90k in 2009 and for several years before (gross inc. on 1040) I retired last year and have $23,500 of S.S. payments plus company pension of $6,000/year and live modestly from the above payments and my savings. The total of all income and S.S. is $29,500 but total income on form 1040 shows only $6,000 as the social security amount was not included as it is under the taxable treshold. I have two quistions: 1) will this large drop in income trigger IRA audit? 2) Do I have to filr tax return this year (2010). Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  Anne replied 3 years ago.
HI

Thank you for using justanswer. I can understand your concern, since your income has dropped so dramatically, however, the IRS gets a report of all income that is connected to your SS#, so they will already know that you have now retired and started collecting Social Security (since there will be no record of any W2, and there will be a record for the Social Security you collect)

As long as your taxable income is <$9500 ($5800 standard deduction + $3700 personal exemption) if you're single, or < $19,100 ($11,600 standard deduction + $3700 x 2 for personal exemptions for yourself and your spouse), then you do not need to file a Federal 1040.

There are of course, some reasons why you might want to file a tax return. For instance, if you have any Federal tax with held from your Social Security or your Retirement Pension, you will want to file to get a refund of the withholding.

Also, I assume that you have some money invested, and that you will eventually be collecting from a Traditional IRA, or interest/dividends from non IRA investments, so you will want to plan ahead for the years that you are either required to take an IRA minimum distribution, or for years that you choose to take interest/dividend payments, etc.

You mentioned that you knew that none of your Social Security is taxable this year, so forgive me if I tell you information you already know, but its part of the "planning ahead" scenario.

If you're single, you add all of your income (pension, interest, etc) +1/2 of your Social Security. If that amount is > $25,000, then you will have taxable Social Security for that year.

If you're married, its the same formula, but the threshold you must be over is $32,000.

For 2011 Filing Requirements, please see below: (you will need to copy & paste this into your web browser)

http://www.savingtoinvest.com/2010/12/2011-tax-benefits-to-increase-with-updated-irs-tax-tables-and-income-thresholds.html

I hope this helps
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1764
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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