Social Security Considerations

Have you elected Social Security benefits? Although some Americans pay zero tax on Social Security benefits, many are subject to income tax on a portion of benefits, with a maximum of up to 85% of benefits paid. If you receive other sources of income (such as wages, interest, dividends, IRA distributions, and pensions), you may be surprised to find out your total income can result in a higher portion of Social Security benefits becoming taxable. One tactic taxpayers can utilize in avoiding a larger tax bill, is having taxes withheld from Social Security payments. By voluntarily choosing to withhold taxes on Social Security benefits, you may avoid a large tax bill when filing taxes at year end. If you fit into one of the three categories below, you may want to consider withholding taxes from Social Security benefits:

  1. File as an “individual” on federal tax return and income is between $25,000-$34,000.
  2. File a joint federal tax return and combined income is between $32,000-$44,000.
  3. Married but filing separate tax returns.

How to Set Your Withholding

Withholding taxes on Social Security benefits begins by filling out Form W-4V from the Internal Revenue Service (IRS). After filling out the form, your next step is to complete the percentage withholding from monthly benefit payments. You may select 7%, 10%, 12% or 22% of your monthly benefit amount. Specific dollar amounts or other percentages are not allowed for withholdings. If you are already withholding taxes from Social Security benefits and want to select a different percentage amount to divert, you can do so by filing out the Form W-4V. To download the form, click on the hyperlink above or call 1-800-829-3676 and request Form W-4V. After completion, Form W-4V can be mailed to your local Social Security office or dropped off in person.

For more information, talk to a SYM advisor. See Social Security’s Benefits Planner: Withholding Income Tax From Your Social Security Benefits. Before making any decisions regarding tax withholding from Social Security benefits, review the benefits of this approach with a tax professional.

Disclosure: The opinions expressed herein are those of SYM Financial Corporation (“SYM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. SYM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. SYM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request SYM-20-115