Social Security Retirement

As of today Social Security has completed mailing form 1099 to all Disability and Retirement beneficiaries. The amounts on this 1099 have been reported to IRS for tax purposes. Remember, Social Security benefits (with the exception of SSI) are not exempt from Federal income tax. Whether or not you have to pay income tax at the end of the year depends on how much other income you receive and what tax bracket you fall into.

If you did not receive your form 1099 form Social Security or have lost it, today is the first day to call and request a replacement. You do not have to have the paper copy to file your income tax; a Social Security representative can give you the amounts over the phone by calling Social Security’s 800 number.

There are three amounts you will need: the amounts paid to you by check or direct deposit, the amount paid to Medicare for premiums, and the sum of the two amounts. If you had payments returned to Social Security for any reason (for example if your bank account was closed and the direct deposit was returned to Social Security) there will be another important amount on the 1099. This amount shows money returned to Social Security.

When you have money returned to Social Security for a given tax year, the total amount paid to you by check or direct deposit will be over by the amount returned. Social Security has to account for money that was reissued to you; as a result, any money that was returned and reissued will also appear in the total you were paid for the year. For tax purposes you need to make sure and use the amount that was returned to Social Security or you will be off on your total annual income.

To request a replacement 1099 or to get the amounts you were paid for tax year 2005, contact Social Security at 1-800-772-1213.

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Social Security benefits are not exempt from Federal income tax. This is true for both Social Security retirement and disability benefits. SSI benefits however, are not taxable. Whether or not you have to pay income taxes on these benefits depends on your total income for the year. For most people who receive Social Security benefits as their only source of income they will not have to pay federal taxes on this amount. Other income sources you will have to consider include any other pension you may be receiving along with wages you earn from employment.

Generally for tax year 2005, if you are single and under the age of 65, and your income is less than $13,005 you are not required to file personal income tax. If you are over the age of 65 and your income is under $17,435 you are not required to file personal income tax.

If you are married the amounts will vary if you are filing jointly or individually.

Generally, if you are filling together and both of you are under the age of 65, the limit is $26,170. If you are over the age 65 and filing together, the limit is $34,870. There may be other conditions that have to be met in order to be eligible for exempt filing status. To be certain whether or not you have to file your personal income tax based on Social Security benefits and any other income you received, contact the IRS at 1-800-829-1040.

Social Security sends out form 1099 statements throughout the month of January each year. You will need the amounts on this form to determine your filing status and to file taxes each year. If you have not received this document by February 1st contact Social Security at 1-800-772-1213 for a duplicate.

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In order to qualify for Retirement benefits under Social Security you need to work and pay Social Security taxes for a minimum of ten years. The ten year requirement does not mean that the ten years of work has to be continuous; Social Security breaks your work record up into “quarters of coverage” or “credits.”

You can earn up to four “credits” for Social Security each year that you work and pay Social Security taxes. In 2006 you need to earn a minimum of $970 per quarter before taxes to earn one credit. If you earn a minimum of $3,880 in 2006 you will receive a total of four credits towards your benefits.

To qualify for Retirement benefits you need a minimum of 40 credits or 10 years of work. It is okay if you have periods of unemployment on your work history as long as your total work adds up to 40 credits. You will not be eligible for Retirement benefits on your own record until you satisfy the 40 credit requirement.

After you have earned your 40 credits to qualify for Retirement benefits, your earnings are still counted. You will not earn any more credits past 40; however, Social Security looks at 35 years of your earnings to calculate the amount you will receive each month. The amount you receive is based on a number of factors. These factors include the annual amounts of your earnings, the age in which you start benefits, and any possible offsets for pensions you may receive where you did not pay Social Security taxes.

The earliest you can start Social Security Retirement benefits is age 62. If you file for benefits before your full retirement age you will receive a reduced amount based on your age. To learn how much you will receive each month for your Retirement benefits check your Social Security statement. There are three benefit amounts pertaining to Retirement on the statement; these amounts are the reduced amount at age 62 and the unreduced amount you will receive at your full retirement age. The final amount is what you could receive if you wait until age 70. By waiting until age 70 before taking your retirement benefits you earn what are called “delayed retirement credits” which can significantly boost your monthly benefit amount.

To determine your full retirement age use the following chart:

Birth Date ————- Full Benefit Age
1937 or prior ——– 65
1938 ——————-65 plus 2 months
1939 ——————-65 plus 4 months
1940 ——————-65 plus 6 months
1941 ——————-65 plus 8 months
1942 ——————-65 plus 10 months
1943 to 1954 ——– 66
1955 ——————-66 plus 2 months
1956 ——————-66 plus 4 months
1957 ——————-66 plus 6 months
1958 ——————-66 plus 8 months
1959 ——————-66 plus 10 months
1960 to present —– 67

You should be receiving a Social Security statement in the mail each year around three months prior to your birthday. If you are not receiving a statement make sure the IRS has your correct address as Social Security does not maintain an address for you until you start benefits. You can reach the IRS at 1-800-829-1040.

You can also request a Social Security Statement online from Social Security’s website at the following address:

http://www.ssa.gov/mystatement/

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