If Social Security or Railroad Retirement Benefits are your entire source of income for the tax year, you may not have to file a tax return. Even if you received any other form of income, your benefits are typically tax-free as long as your modified adjusted gross income (MAGI) is more than the base level for the filing status you use.
Even if your Social Security benefits aren’t taxed, you may still need to file a tax return if you receive other income. You can use a Form 1040 worksheet to calculate your MAGI and which portion of your benefits are taxable. If you receive benefits for prior tax years, you may be able to claim a lump-sum election, which lessens the benefit amount subject to taxes.
To determine if your benefits are taxable, you’ll have to include in your gross income those benefits which you have a legal entitlement to. If both you and a dependent (such as a spouse or child) receive benefits, you only have to calculate those you are entitled to, no matter who the check was distributed to. So, if your child receives benefits in your name, you do not calculate those benefits in your own tax return, and instead will have to be added into other sources of income for the child.
Those who have taxable benefits will need to file a Form 1040 or 1040A, U.S. Individual Income Tax Return. You can’t file a 1040EZ. The benefits you receive will be documented on either Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board. These forms will also state any worker’s compensation benefits you received, as well as the amounts paid to legal recipients.
If you file a joint return, you need to combine your income, as well as social security benefits and railroad retirement benefits. You’ll have to add your spouse’s income in order to calculate the correct amount of benefits that are taxable.
You can chose to withhold additional tax from income sources outside of your benefits in order to cover the amount you may owe in taxes, or you can pay estimated tax quarterly throughout the year. You can also opt to have income tax withheld directly from your benefits.