Obama's Plan Could Hurt Senior Citizens

You know those $250 checks now being sent to Social Security recipients courtesy of President Obama's economic recovery package? Well, some seniors may have to pay some of it back to the government.

The problem, according to a Washington Times report, is that Social Security beneficiaries who are still working full time also qualify for Obama’s $400 Making Work Pay workplace tax cuts and, unless the tax laws are changed, they cannot qualify for both. The “surplus” will, have to be paid back to the government.

“Congressional and IRS officials say taxpayers cannot double-dip into both programs,” says the Times. “If you are getting extra Social Security money and benefit from a lower withholding in your paycheck, the two will have to be reconciled when you file your 2009 tax returns next year.”

If this comes as a surprise to you, you are far from alone. “I have seen no publicity to tell people drawing Social Security that they are not eligible for both the Social Security payment and the Making Work Pay tax credit,” Roberton Williams, senior fellow at the Tax Policy Center in the Urban Institute told the Washington Times. “The only people who know this are those who carefully read the stimulus bill," said Mr. Williams, adding, "It's only 600 pages long.”

Also See:

$250 Social Security, SSI Checks to be Sent During May 2009
Obama Tax Cuts
Economic Stimulus Package - How it Could Affect You

Are Your Social Security Benefits Taxable?

How much, if any, of your social security benefits are taxable depends on your total income and marital status. Generally, if social security benefits were your only income for 2008, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status. Your taxable benefits and modified adjusted gross income are figured in a worksheet in the Form 1040A or Form 1040 Instruction booklet.

Before you go to the instruction book, do the following quick computation to determine whether some of your benefits may be taxable:

First, add one–half of the total social security you received 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. If the total is more than your base amount, some of your benefits may be taxable.

The 2008 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

For additional information on the taxability of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Resources:

Publication 915, Social Security and Equivalent Railroad Retirement Benefits (PDF 994.0KB)