No place to select federal withholding when applying online for Social Security

[East Texas]

A friend of mine recently signed up for social security benefits using the online SSA system. He told me the amount of his check and when I asked him if the amount was gross or net (of taxes) he had the proverbial deer in the headlights look (apologies to you non-Texans for the phrase). He wasn't aware federal withholding is NOT automatic with SSA. He said he didn't see any place to select federal tax withholding as a part of the online documentation process. Now he has to print, complete, and mail Form W-4V to have federal taxes withheld. That doesn't sound very paperless to me.

Does anyone know the rationale behind the SSA not having a federal tax withholding selection as a part of their online system? Printing and mailing a hard copy seems to be diametrically opposed the government pushing a paperless system. I realize a few decades ago most people might not have needed federal withholding due to their income level; however, I think now the majority of people will have their social security taxed. It just makes more sense to handle the federal tax selection during the initial sign-up process.

I'd rather drive to the nearest social security office and sit in front of an agent to process my retirement and the federal withholding all at one time.

What am I missing?

 

[W2R]

Well, I guess some people might want withholding. Personally, I have to do quarterly estimated taxes anyway, so it may be simpler for me if I can just include my SS taxes in my estimates.

 

[REWahoo]

The withholding option was there when I signed up online three years ago. I can't imagine why the SS folks would remove it. Maybe a case of applicant error?

EDIT: I recall that I signed up online then SS sent me some additional forms to complete. The withholding documents may have been part of the written forms, but in either case I was definitely offered the opportunity to have taxes withheld from day one.

 

[East Texas]

The withholding option was there when I signed up online three years ago. I can't imagine why the SS folks would remove it. Maybe a case of applicant error?

That's what I asked! He said he went back over his screen prints and didn't see any option for federal withholding. Then he called SSA and got some gibbly-goop that didn't make sense - something about seeing your tax advisor before even thinking about having taxes withheld (it was completely off topic).

I'm hoping someone who just went through the process would chime in and confirm one way or the other. At least I know the option was there three years ago. Do you get a monthly statement online or is one even available?

 

[REWahoo]

Do you get a monthly statement online or is one even available?

No monthly statement is provided in any form, only a year-end SSA-1099.

 

[East Texas]

I'm hoping someone just signed up online and can confirm there is a section for federal tax withholding. If it works out that way, then this should be good for several taunts of "you don't even know what you signed up FOR?". I should get some good mileage out of this..... I laughed when he said he was waiting for his monthly statement in the mail to confirm taxes were not withheld. I asked him to look up the word "paperless".

The Form W-4V gave four options for withholding: 7%, 10%, 15%, and 25%. I'm wondering if any of you who filed for social security in person got to select another withholding amount? I would prefer to have 20% withheld.

 

[East Texas]

On your ETA, I just asked him and he said he never got any forms. All he got was one phone call after he signed up online and that was to clarify one of his answers.

 

[REWahoo]

The online process has obviously changed since I signed up, but once again I cannot envision an applicant not having the opportunity to opt for withholding, or at the very least provided instructions on how to go about setting it up.

 

[JakeBrake]

If your only income is from SS, why would you need to have anything withheld? If you have other retirement income sources , like IRA's, why not have an amount sufficient to cover your all your taxes withheld from each withdrawal and not have to file estimated taxes? With Fidelity/Vanguard you can have any amount withheld from each withdrawal. We usually get most of this back in our income tax refund.
In my dealings with IRS, it's always better to have paid too much than not enough.

When DW signed up for SS on my record, we did everything on line. No trip to the SS office. A few weeks later she received a letter from SS, which said she had been selected for a random audit. The SS auditor wanted to review our income tax returns from 1992 (yes, that's right 1992) and 2005. Fortunately, we had both. I had to explain a couple of things which we did by phone. We have always filed jointly. He also wanted a certified copy of our marriage license. To get our marriage license certified, we had to take the marriage license to our local SS office, where they certified it and sent a certified copy to the SS auditor, who was several states away from us.

 

[East Texas]

<snip>
When DW signed up for SS on my record, we did everything on line.

Was there a place online to select federal withholding whether or not she chose it?

 

[JakeBrake]

Was there a place online to select federal withholding whether or not she chose it?

Looking at the hard copy from DW's online application in August of 2011, there is a section entitled "Voluntary Tax Withholding", which we did not open, so the contents of that section is not on our hard copy. The letter she received from SS said something about the Form W-4V that she had to return to local SS office. We did not pursue because we were not interested,

"Part of your SS benefits may be taxed if you are married and you and your spouse have total income of more than $32,000."

Refer to my previous post where we plan to have sufficient funds withheld from IRA withdrawals.

 

[kaneohe]

This page strongly suggests that you can request withholding when you apply
Withholding income tax from your Social Security benefits

The site wouldn't allow applications when I tried.....maybe doing midnight backups............

 

[East Texas]

This page strongly suggests that you can request withholding when you apply
Withholding income tax from your Social Security benefits
QUOTE]
I missed the first line in that webpage that says you can select withholding when you apply.

The site wouldn't allow applications when I tried.....maybe doing midnight backups............

You're in the process of applying? If so, I look forward to your next post!

 

[donheff]

The SS auditor wanted to review our income tax returns from 1992 (yes, that's right 1992) and 2005. Fortunately, we had both. I had to explain a couple of things which we did by phone. We have always filed jointly. He also wanted a certified copy of our marriage license. To get our marriage license certified, we had to take the marriage license to our local SS office, where they certified it and sent a certified copy to the SS auditor, who was several states away from us.

I guess I am glad to see that SS does some random audits but asking for tax returns from 1992? That seems insane. I would expect only a small percentage of filers would have returns going back that far.

 

[rescueme]

If you have other retirement income sources , like IRA's, why not have an amount sufficient to cover your all your taxes withheld from each withdrawal and not have to file estimated taxes?

Exactly.

I pay taxes on my TIRA monthly withdrawl to not only cover taxes on the amount taken, but also to cover FIT for my monthly SPIA income. When I start getting SS, I'll just cover FIT via the TIRA withdrawl.

No extra forms nor quarterly taxes to worry about...

BTW, I get TT early in December and run a preliminary of FIT due against all actual/estimated income for the year. I just adjust my TIRA December withdrawl up/down to adjust for possible FIT due (or not). For the last five years of retirement, I've always come within $50 due/credit when I actually file my 1040.

 

[donheff]

Exactly.

I pay taxes on my TIRA monthly withdrawl to not only cover taxes on the amount taken, but also to cover FIT for my monthly SPIA income. When I start getting SS, I'll just cover FIT via the TIRA withdrawl.

No extra forms nor quarterly taxes to worry about...

I increased withholding on my pension to cover DWs self employment taxes. Much easier than filing quarterlies. I will do the same when she files for SS.

 

[kaneohe]

You're in the process of applying? If so, I look forward to your next post!

unfortunately, no. I was just curious and trying to fill out a dummy form.

just as another data point, I'm guessing I've done perhaps
300 or so tax returns as a volunteer w/ AARP Tax Aide program.
Out of those I've seen perhaps 1 where withholding was done via SS.
Granted, some of those folks were returnees so not an independent sample size, and there may be some self-selection bias toward lower income folks.
Still there is some fraction of more moderately higher income folks and the
trend by far is to either withhold via pension/IRA distributions and/or estimated taxes.........don't know the reason but I know I'd much rather deal on the phone w/ anybody but SS..........they are always polite and very helpful but you have to wait nearly an hour on the phone. Too many of us and not enough of them., I guess.

 

[REWahoo]

I'm not understanding the objection some appear to have to withholding taxes from SS benefits. In our case we withhold 10% from SS and also have 10% withheld from our automatic bi-weekly withdrawal from my Vanguard IRA. Our refunds the past two years have been small, so the amounts are right on.

I see no benefit to having zero withholding from SS and having to compute how much additional I should withhold from my IRA distributions to cover the tax owed.

What am I missing?

 

[ziggy29]

I see no benefit to having zero withholding from SS and having to compute how much additional I should withhold from my IRA distributions to cover the tax owed.

What am I missing?

I think some people prefer the control of sending it in themselves, and also of "not giving the government use of their money before they have to." When cash is earning 4% this latter point can be significant over time, but when it earns 0.4% (if that) it doesn't seem to me that it's worth the hassle of filing quarterly estimates.

 

[rescueme]

I increased withholding on my pension...

What's a pension?

 

[East Texas]

I'm not understanding the objection some appear to have to withholding taxes from SS benefits. In our case we withhold 10% from SS and also have 10% withheld from our automatic bi-weekly withdrawal from my Vanguard IRA. Our refunds the past two years have been small, so the amounts are right on.

I see no benefit to having zero withholding from SS and having to compute how much additional I should withhold from my IRA distributions to cover the tax owed.

What am I missing?

From my point of view, you're not missing a thing. I like getting a refund so the pain of paying some of our annual bills is less painful. As for those of you with the opinion I'm loaning the government my money sans interest - don't care. And the second school of thought of saving and investing that money is nowhere in my realm of caring (as if there would be any real earnings these days).

I just like the warm and fuzzy feeling of the refund hitting our bank account. It's kind of like having hot cocoa with real whipped cream on a cold and windy day. Or a cold beer on the porch on hot days. It makes me feel good all over.

 

[ziggy29]

From my point of view, you're not missing a thing. I like getting a refund so the pain of paying some of our annual bills is less painful. As for those of you with the opinion I'm loaning the government my money sans interest - don't care.

It's even easier to have this attitude when savings rates are near zero. What has it cost someone to let the government use an extra (say) $2000 over the course of a year? If you assume they've used the money for an average of an extra 6 months, excess withholding costs you 6 months of interest on $2000 -- which at 0.5% interest on savings would be a whopping five bucks.

But if you think seeing an extra $40 in your paycheck every week would have likely seen it some or all of it spent into the ether, then maybe the "IRS savings plan" isn't so bad after all. It's a lot easier, I think, to spend an extra $40 a week in day to day living stuff than it is to make a conscious decision to spend a $2000 windfall.

I don't advocate overwithholding for the express purpose of getting a big refund, but especially given the pathetic return on cash today, the "free use of money" argument isn't very compelling. I think I'd rather give Uncle Sam a 0% loan than give an 0.5% loan to a bank.

 

[Dreamer]

We just completed the W-4V this month to have Federal taxes taken out of DH's SS checks. We sent it by snail mail. We applied for SSA online. There is still not a way to have state tax withheld from SSA. We owe Fed income tax over $2000.00 on tax return. Luckily, there is no penalty, since we paid over what 100% of what our taxes were last year. Our income has jumped all over the place, but next year it should stabilize.

 

[East Texas]

I finally got a hold of someone who recently processed her retirement and she said there wasn't any way to select withholding online - she had to print and mail the form. She said she mailed the form (with her social security number prominently displayed), it was processed, and then mailed back to her with the amount of her net pay.

I don't understand why paper would be injected into a paperless process. This just screams for a process improvement. I'll just drive to the nearest social security office when it's my turn to file and do all of the paperwork in person.

 

[rescueme]

From my point of view, you're not missing a thing.

In our case, our income is not driven by a constant WD rate. As our expenses expand/contract month by month, we change the amount of our IRA withdrawals along with the FIT paid (we do not pay state nor local income tax on retirement income).

Since our income is driven by expenses (and not the other way around), our FIT changes as does our expenses/withdrawals. An extreme example of that is when I purchased a car in 2008 by using TIRA funds, and computed/withdrew enough in one month to cover estimated FIT due. In December, I ran the updated 2008 TT initial release and it showed additional FIT due for the year, which I had Fidelity withdraw from my account (and forwarded to the Feds).

For most folks who use a constant WD rate (regardless if you do it by year or by month), I understand the idea of having a constant tax. No different than we had during our employment years.

However today, we're fortunate not to have to limit our expenditures to a certain percentage but let our desires drive our income needs. For those that are wondering, yes - our net income today exceeds that of our employment years...