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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2928
Experience:  IRS licensed Enrolled Agent and tax instructor
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How and why is the IRS justified in taxing social security

Customer Question

How and why is the IRS justified in taxing social security benefits twice,
while working and then when retired and drawing benefits???
I seriously doubt I can expect an honest answer?
Submitted: 2 years ago.
Category: Tax
Expert:  emc011075 replied 2 years ago.
Hi. My name is ***** ***** I will be happy to help you.
The issue is slightly more complicated. During your working years you are making contribution to social security (and Medicare) government trust fund that is used to pay current social security recipients. It is not a savings account with your name on it you are entitled to once you retire. Social security income is not guaranteed and the government decide how much you get. It is a benefit, just like unemployment or welfare benefits. While you work, your employer is contributing to unemployment fund on your behave so when you loose your job you receive unemployment benefits. Social security benefits work in similar way.
When you start receiving social security benefits and still have other income from other sources that exceed certain threshold, your social security benefits are being reduced by income tax. Just like unemployment benefits are being reduced if you earn small income. Again, social security income is not guaranteed income, it is a BENEFIT and as such it comes with certain restrictions.
Sorry if it is not an answer you hopped for.