Social Security Tax Withholding

[meleana]

I am currently obsessing on what percentage of taxes to have taken out of my husband's SS.


He is turning 70 this April so first check will be in May and therefore 9 months of benefits for 2024. Somewhere around $34,000 I think.



We have been in the 12 percent tax bracket since retiring in 2020 and just started doing small Roth conversions two years ago at $55,000 per year.( We choose to have the taxes for those taken right out of the converted account at 12 percent.)


I also have an Inherited IRA and the taxes for the minimum RMD's are also withheld at 12 per cent.



We have no pensions and I am not taking SS yet myself. We've been living off cash.


WE usually get back about $2000 when we file our taxes.


Anyway, our AGI last year was $74,000 (with the $55,000 conversion included.)



This year I am assuming about $29,000 of SS will be taxed? Not sure if I understand it all correctly, but wouldn't this put us then in the 22 percent tax bracket?



I want to send in the W-4V form once his SS is approved and I am not sure if I should have 12 percent or 22 percent withheld. What do you think?



Not only that- should I also change the withholding on the Inherited IRA RMD (which I do this March) and the conversion account (when we do it at the end of the year) from 12 to 22 percent?


Thanks for your input in advance.

 

[Midpack]

Just do the calculation for yourself with your particulars https://www.dinkytown.net/java/1040-tax-calculator.html. I just entered $74K income, 85% of $29K SS income and assumed you're filing MFJ and both over 70 yo - and that's still in the 12% bracket. That will also answer the question on what you should withhold in total (how you split that up between SS, Roth and/or quarterly estimated payments is your choice).

I assume you also have some dividend income that's not subject to ordinary income tax rates?

As for what you should have withheld from your SS benefit, that would depend on what else is withheld and/or what you plan to pay for estimated payments. You could withhold the 22% max on SS if you're going to be making estimated payments quarterly anyway. If you withhold less, your estimated payments will go up.

 

[xlf11]

You can choose a withholding rate of 7%, 10%, 12%, or 22% only for SSB. If you have other means like IRA, it would be more flexible to do it there than dealing with SSA (you cannot change withholding like direct deposit on the website).

 

[qwerty3656]

I think you can just have taxes withheld from your last IRA withdrawal of the year and not bother with estimated taxes. Presumably you'll have a better understanding of your tax situation then.

My understanding is that taxes from IRA withholding is treated as if done pro rata - others can chime in if I'm wrong.

 

[CardsFan]

Just a reminder on the withholding. Set it up in the very beginning when you talk to the SSA person. You can NOT set up withholding on line after the fact. You would then need to send a paper form. And if you want to change it in the future, another paper form to be sent.

 

[meleana]

Just do the calculation for yourself with your particulars https://www.dinkytown.net/java/1040-tax-calculator.html. I just entered $74K income, 85% of $29K SS income and assumed you're filing MFJ and both over 70 yo - and that's still in the 12% bracket. That will also answer the question on what you should withhold in total (how you split that up between SS, Roth and/or quarterly estimated payments is your choice).

I assume you also have some dividend income that's not subject to ordinary income tax rates?

As for what you should have withheld from your SS benefit, that would depend on what else is withheld and/or what you plan to pay for estimated payments. You could withhold the 22% max on SS if you're going to be making estimated payments quarterly anyway. If you withhold less, your estimated payments will go up.

No- the $29,000 is the 85 percent of the $34,200 SS. I am 67 years old.


We don't pay estimated taxes. We always get $ back each year. We are in the 12 percent tax bracket with a simple tax return.

 

[meleana]

I don't think folks are understanding what I am asking. I am asking what percentage should we have automatically withheld. 12 percent or 22 percent?

 

[meleana]

Just a reminder on the withholding. Set it up in the very beginning when you talk to the SSA person. You can NOT set up withholding on line after the fact. You would then need to send a paper form. And if you want to change it in the future, another paper form to be sent.

He applied on line and they did not ask about withholding on the application. The local SS office said once he has the approval letter from SS then he should send in the W4-V to the local SS office. No big deal.

 

[GrayHare]

Based on the details you have provided so far, I'd withhold 12% and reduce the tIRA conversion amount until I know how much I can convert and stay in the 12% backet.

 

[Al18]

According to the IRS https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2024 you are in the middle of the 12% tax bracket now and will likely stay in the 12% tax bracket after SS starts. As you can see from the IRS link, the 12% tax bracket extends to an AGI of $123,500, assuming you are taking the standard deduction for married filing jointly. Withholding 12% is a good starting point.

 

[Midpack]

No- the $29,000 is the 85 percent of the $34,200 SS. I am 67 years old.


We don't pay estimated taxes. We always get $ back each year. We are in the 12 percent tax bracket with a simple tax return.

I don't think folks are understanding what I am asking. I am asking what percentage should we have automatically withheld. 12 percent or 22 percent?

We do understand your question. I gave you a link to easily figure it out...

So your 2024 situation will be:
Tot Income will be $102,900 ($74,000 + 85%x$34000)
Your standard deduction will be ($32,300) MFJ both over 65 yo.
So your new taxable income will be $70,600 - well under the 22% bracket that starts at $94,300.
Fed taxes on that estimated at $8035.

Your 2023 situation was:
Tot Income $74,000
Standard deduction ($30,700)
Taxable income $43,300
Fed taxes on that estimated at $4759

You say you were getting a refund of $2000, so your 2023 total withholding from your IRAs must have totaled about $6759.

So you'll need to withhold an additional $1276 ($8035-$6759) per year and if so you will get no refund, withhold more if you want to ensure a refund. 12% would be more than enough, with a significant refund in 2024...

 

[target2019]

Think of this income as going on the top of all other income from previous years. You've said you are in the 12% bracket, and based on input by others your Roth conversion and this SSA income will leave you in the 12% tax bracket. So 12% is a safe estimate.

I mailed in the W4-V in December, and first check in this year had the deduction. Very easy to do as you mentioned.

 

[meleana]

Thank you all! Makes a little more sense to me. Just didn’t understand how it worked with tax brackets and adjusted income and so forth, so I guess I’ll withhold the 12 percent and see how it all works out.

 

[meleana]

We do understand your question. I gave you a link to easily figure it out...

So your 2024 situation will be:
Tot Income will be $102,900 ($74,000 + 85%x$34000)
Your standard deduction will be ($32,300) MFJ both over 65 yo.
So your new taxable income will be $70,600 - well under the 22% bracket that starts at $94,300.
Fed taxes on that estimated at $8035.

Your 2023 situation was:
Tot Income $74,000
Standard deduction ($30,700)
Taxable income $43,300
Fed taxes on that estimated at $4759

You say you were getting a refund of $2000, so your 2023 total withholding from your IRAs must have totaled about $6759.

So you'll need to withhold an additional $1276 ($8035-$6759) per year and if so you will get no refund, withhold more if you want to ensure a refund. 12% would be more than enough, with a significant refund in 2024...

Thank you!!

 

[target2019]

Thank you all! Makes a little more sense to me. Just didn’t understand how it worked with tax brackets and adjusted income and so forth, so I guess I’ll withhold the 12 percent and see how it all works out.

It takes a stretch of thought to bring this all together. There are online calculators (each one seems to differ on format or content) and then there are the actual tax forms you or tax preparer complete.

So you have an estimation model (the online calculator), but the tax forms filled in are the gospel.

The 12% bracket you will be in for 2024 (we estimate and predict) means the next dollars of income will get taxed at 12%. However, as pointed out, you could have 10% withheld and that will probably work.

I vote for 12% withholding for the SSA, because there may be some additional interest or dividend income you are not remembering.

 

[meleana]

It takes a stretch of thought to bring this all together. There are online calculators (each one seems to differ on format or content) and then there are the actual tax forms you or tax preparer complete.

So you have an estimation model (the online calculator), but the tax forms filled in are the gospel.

The 12% bracket you will be in for 2024 (we estimate and predict) means the next dollars of income will get taxed at 12%. However, as pointed out, you could have 10% withheld and that will probably work.

I vote for 12% withholding for the SSA, because there may be some additional interest or dividend income you are not remembering.

Yes, Thanks. I feel a bit safer with the 12% also.Keep it consistent with the withholding on the Inherited IRA and Roth conversion.

 

[meleana]

BTW- My husband has been having the Medicare Part B premiums taken out of our checking account since he retired in 2020. Will they automatically be taken out of SS now? Is there something we need to do to stop the automatic withdrawals from our checking account?

 

[pb4uski]

BTW- My husband has been having the Medicare Part B premiums taken out of our checking account since he retired in 2020. Will they automatically be taken out of SS now? Is there something we need to do to stop the automatic withdrawals from our checking account?

I recall reading a post of a similar situation and once SSA started taking Part B out of SS benefits then the checking account withdawals automatically ceased.