Fed tax soc serc

[joekool]

I’m 63 getting severence  from last year in aug I’m thinking about filing for soc serc sep 1 from what I understand anything income prior I will not b penalized but it will put me over 25000 and will pay fed tax. I’ve  thought about waiting until Jan 1 2022 so their is no question.  I will b getting a pension ,interest on income but will not put me over 25000 for fed tax  however if soc serc itself go towards 25000 threshold which would put me over Is pension interest on savings  and ir 401k and soc serc go towards that fed tax threshold I also wanted to know should I have tax taken out or wait and see how it plays out and also how does soc serc know to waive my severence as to not b penalized if I take  it in sept. I also like to know is it better to do it online or have them do it over the phone.   Thank y

[VEpling2]

The $25,000 limit determines if any or how much of your social security benefits will be taxable.  The limit takes into consideration 1/2 of your social security benefits plus all of your other income.  From this perspective your severance pay will be considered to determine the taxable amount of your social security benefits.  Also your interest from your savings and any distributions from your 401(k) would be included in the calculation on how much of your benefits are taxable.  For example, if your severance pay is $12,000, your social security benefits are $20,000, and your 401(k) distribution is $5000 then the amount used to determine how much of your benefits are taxable is $27,000 (12,000 + 10,000 + 5000).  In this case part of your social security benefits would be taxable. 

The severance pay should not affect the amount of benefits you are able to get.  I believe this is what you mean when you say you should not be penalized for income received prior to applying for social security.  However, the calculation on how much your benefits should be is a completely different matter than the calculation of how much of your benefits are taxable.

Lastly, whether or not to have taxes withheld from your social security will depend on how much other income you have and how much withholding you already have in place.  It does not hurt to have some withholding taken from your benefits.  If you find that you are getting a large refund, then you can reduce or eliminate your withholding next year.  If you choose to not have any withholding for taxes and just see how it plays out, you could end up owing taxes at the end of the year.  Whether you would prefer to owe taxes or get a refund is up to you though.