 Income tax 2021-2022, social security benefits. Get ready to get refunds to the max, diving into income tax 2021-2022. Here we are in our income tax formula. We're looking at the top line, that being the income line. This is the first page of the 1040. We're looking at line 6, 6A being the social security benefits, total 6B being the taxable amount. Quick recap of the social security in general. When you hear social security, you want to think about what side of the coin are we talking about? Are you talking about the point in time during your work in years when you're paying into social security? If you're a W-2 employee, it's being pulled out of your wages with payroll taxes, for example. And if you're self-employed, then you pay it in self-employment tax. We'll talk about that later. Or are we talking about the time after our work in years when we're receiving the social security? That's what we're looking at at this point because we're looking at income and whether or not now that you're receiving the social security, you have to record it in income and possibly be paying the taxes on it. Also realized that social security is one of those kind of things that we're not really sure in the United States as to whether we see it as basically a benefit program or we see it as a program that's like a safety net type of program. In other words, people after their retirement, after their working years, if they need the money, then they have this safety net to help them out or are we seeing it as more of a retirement kind of program and that because the taxes we pay into it are quite significant, is there some kind of entitlement that we put the money in there, we should be getting a benefit. And you can kind of make your judgments in terms of what side of the spectrum we're on, is it more of a safety net or is it more of a kind of entitlement based on how much money you put in and how the calculation is on how much money you're gonna get back and then the taxable amount of it, which is all quite confusing when you get into the weeds on that kind of thing. Note also when you're recording the taxes or making the tax return, the software will of course help you out to determine the taxable portion. So usually you're gonna get the 1099 and doing the data input into the system is gonna be fairly simple. However, you might also get questions from clients about social security in terms of when should they claim social security, what's gonna be the calculation of the types of benefits based on their working history and this kind of stuff as well, which kind of goes beyond normal tax planning because we're looking at the federal income taxes. But again, you might get questions about that and for that kind of stuff, you'd have to dive into more research in terms of how the social security is calculated and so on and so forth. So we won't dive into that in too much detail here. We're focusing in on, but just realize that a client could ask those questions could come up and you might wanna have some background on that as well. But here, we're trying to say, okay, someone received the social security, typically we'll have the 1099 for it and then we gotta record it, tax software will help, question being how much of it's gonna be taxable and generally up to basically 85% of it will generally be taxable. So in other words, if I was to look at this here, we've got the 5,000 reported, the 425O divided by the 5,000 would give us the 85%. Now, there's like phase out type of requirements if your income was lower then you could have less than that. So it would be up to that point, up to that point would be the general answer. Most software, you can kind of dive into the software and look at the more detailed calculation. So this is actually a calculation of the tax and you could go through it line by line and see kind of how it goes up to basically the limit of the 85%. So we'll experiment with that a little bit more in the following presentation when we get into the tax software. So social security benefits, you should receive a form SSA 1099 so it should be fairly straightforward to do the data input into the system. Showing in box three, the total social security benefits paid to you, box four will show the amount of any benefits you repaid in 2021. If you received a railroad retirement benefits treated as social security, you should receive a form RRB 1099, use the social security benefit worksheet in these instructions to see if any of your benefits are taxable. So in essence, the software hopefully will help you out with that worksheet to basically determine whether or not it'd be taxable or not. And if you wanna dig down into it and see where the thresholds are, then you can basically dive into that in a bit more detail. But the general answer is basically up to 85% could be taxable. Exception, do not use the social security benefit worksheet in these instructions if any of the following apply. You made contributions to a traditional IRA for 2021 and you or your spouse were covered by a retirement plan at work or through self-employment. Instead use the worksheet in publication 590A to see if any of your social security benefits are taxable. You've repaid any benefits in 2021 and your total repayment box four were more than your total benefits for 2021. You file form 25554563 or 8815 or you exclude employer provided adoption benefits or income from sources within Puerto Rico. Social security information, social security benefits can now get a variety of information from the SSA website. So that's where you'd wanna dig in if they've got question about, a lot of times software will often tell you as well as part of your tax planning, it'll tell you if someone is getting close to being able to claim social security and those types of things which you might then mention as an added benefit to preparing the taxes. And then of course you're gonna inevitably get into questions in terms of, well, when should I be claiming the social security? How are they gonna calculate the social security? What can I do in terms of my working situations at this point in time if I'm self-employed, for example, to maximize the benefits and so on and so forth. So you can go to the SSA website to get more information about that and dig into that in a bit more detail. With my social security account, include getting a replacement form SSA 1099 if needed. So if you don't have that form, then you can go there and try to get that form as well. For more information and to set up an account, go to the ssa.gov page and then set up your account disability payments, include social security disability insurance, SDSDI payments are generally not included in income if they are for injuries incurred as a direct result of a terrorist attack directed against the United States or its allies. If these payments are incorrectly reported as taxable on form W2 or form 1099R, contact the company or agency making the disability payment to get a corrected form W2 or 1099. You may receive a notice from the IRS regarding the omitted payments, following the instructions in the notice to explain that the excluded payments aren't taxable. So obviously if you have some kind of form like a 1099 or W2 that's not right, then you would like to get it corrected from the source of the form because the IRS has that form as well. You still want to report it properly on your tax return side, but if you can't get the form corrected, the IRS will almost certainly come back and question you about it because it's not tying out to what they have and you'll have to go through that process. Exception two, you must file schedule D, but you only don't have to file form 8449 if exception one doesn't apply. You aren't deferring any capital gain by investing in a qualified opportunity zone, fund or terminating deferral from an investment in a qualified opportunity zone and your only capital gains and losses are capital gains distributions, capital gains distributions, a capital loss carryover from 2020, a gain from form 2439 or 6252 or part one of form 797, a gain or loss from form 4684, 6781 or 8824. And I won't go into this exception in more detail here, but if you want to dig down on it in more detail, you can find it or start to look at it on the IRS website at irs.gov, just look at the 1040 instructions.