Tax time: Minimizing the amount of federal tax owed on social security benefits
PITTSBURGH (KDKA) -- Tax preparers are putting out the warning -- watch out for taxes you may not even realize you owe.
For a growing part of America's population, taxing social security can be a nasty surprise.
There can be real relief for so many when the social security payment arrives, and the good news is that Pennsylvania is one of 38 states that doesn't tax social security benefits.
Metz Lewis tax specialist Mike Herzog says Washington is not so generous.
"So at the federal level, you can potentially be taxed up as much as 85% of your Social Security benefits," Herzog said.
Herzog says it all depends on how much money you brought in last year.
"If you have income more than $34,000 as an individual, 85% of your Social Security benefits will be taxable," Herzog said.
If you're married and you have more than $44,000 of income, as a couple, 85% of your Social Security benefits will be subject to federal income tax.
"If your income levels are below that, the subject of the benefit is removed. It gets reduced to 50%," Herzog said.
When it comes to warding off the tax, Herzog says there are ways to mitigate the reach of the federal income tax by utilizing Roth retirement accounts.
"It's a great strategy to minimize the taxation of social security benefits," Herzog added.
If it looks like this could happen to you again next year, Herzog says you might consider increasing your withholdings or make quarterly payments.
If you owe and don't have the money, the IRS will take a payment plan. However, Herzog called the process to enter an agreement 'arduous' and recommended finding the money some other way, like taking a loan from a family member.
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