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Lane
Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3716
Experience:  Providing Financial & Tax advice since 1986
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Re: 2012 Tax Return My husband is retired and has social

Resolved Question:

Re: 2012 Tax Return My husband is retired and has social security benefits only. I have my own earned income and sole proprietor business losses, my husband is not part of the business. My husband withdrew money from his IRA. Using Turbo Tax, the program move about 85% of his social security benefits as taxable income. We thought that IRA withdrawals would not affect his social security income and be taxed? Is the program correct or incorrect? Thank you.
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Lane :

Hi,

Lane :

Yes, sorry, IRAs, salary, pensions ALL are other ORDINARY income that can affect the taxaiton level of social security

Customer:

good evening!

Lane :

Hi!

Customer:

Ok, I was just reading on the SS website that pensions received from a job in which

Lane :

Yes, again here's a quick blurb on this ... let me get you the IRS guidance too: http://money.cnn.com/retirement/guide/SocialSecurity_basics.moneymag/index17.htm

Customer:

you are receiving SS do not affect you SS....ok thank you for the link

Lane :

sorry go ahed

Customer:

ok just to confirm, I received the earned income...the business losses were mine,

Lane :

That piece may be right , but a basic withdrawal of IRA is treated as ordinary income for this purpose .... (the policy/logic here, is that the taxable income coming from IRAS are salary deferrals or other dollars that have never been taxed

Customer:

he had social security only, but he did withdraw his own IRA so that does

Customer:

affect his SS as being taxable....yes I realize that IRA withdrawal is treated as

Lane :

That's right ... the IRA withdrawal is part of that "other" income

Lane :

You file jointly?

Customer:

income, but that makes his SS taxable as well? yes we file jointly

Customer:

sorry i kept hitting the enter button..haha

Lane :

:)

Customer:

ok great, well the upside is that I don't have to file an ammended return! haha thanks for all your answers!!

Lane :

Yes the term that is used is "combined income"

Lane :

To determine if you will pay taxes on your Social Security benefits you must come up with an estimate of what you think your combined income will be. Social Security considers your “combined income” the total of your adjusted gross income plus non-taxable interest, plus one half of your Social Security benefits. Note that ROTH IRA withdrawals do not count in this formula but municipal bond income does.

Lane :

Here's one more (excellent) reference

Customer:

wow you put it in a nutshell I really appreciate that very much!

Lane :

You're very welcome .. have a good evening!

Lane :

You're

Lane :

welcome

Lane :

(darned enter key)

Customer:

you too!

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer:

ABSOLUTELY!!

Lane :

Thank you!

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3716
Experience: Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 8 months ago.

Thanks so much Gail,

... enjoyed working with you.

Lane

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