Are Your Social Security Benefits Taxable?

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The taxable amount of your Social Security benefits depends on your marital status and your total income. Generally, if Social Security benefits are your only income, your benefits are not taxable and you probably will not need to file a federal income tax return.

If you receive income from other sources in addition to Social Security and your modified adjusted gross income is not more than the base amount for your filing status, then your benefits will also not be taxed. (See below for more on base amounts.)

This quick computation will help you determine whether some of your benefits are taxable:

  • First, add one-half of the total Social Security you receive to all your other income, including any tax-exempt interest and other exclusions from income.
  • Then, compare this total to the base amount for your filing status.

The 2012 base amounts are:

  • $32,000 for married couples filing jointly
  • $25,000 for single, head of household, qualifying widow/widower with a dependent child or  married individuals filing separately who did not live with their spouses at any time during the year
  • $0 for married persons filing separately who lived together during the year

According to the Social Security Administration, less than one-third of all current beneficiaries pay taxes on their benefits.

Call our office today if you need help understanding the taxability of your Social Security benefits…we are always here to help you!

FAFSA (Free Application for Federal Student Aid)

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Clients who are applying for financial aid for their college-aged children often ask us for help in completing their FAFSA (Free Application for Federal Student Aid). The FAFSA is used to determine the family’s financial need and includes information from the tax return.

The IRS now has a Data Retrieval Tool http://www.fafsa.ed.gov/help/irshlp9.htm that enables a parent or student to access and transfer their tax return information directly to the FAFSA. Using this tool will ensure the FAFSA has accurate information and also means a copy of the tax return will not have to be submitted.

The tool is available on the FAFSA website. If the student or parents qualify, they will be given the opportunity to retrieve, display and transfer their federal  tax information. To qualify, one must have a valid Social Security Number, filed a current (i.e. 2011) tax return and not have changed their marital status since December 31 of that tax year.

A  very handy Help tool is also available on the FAFSA website. I have provided all the necessary links (in blue) – Just click on them and it will take you there.