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IRS.gov Website
Publication 554
taxmap/pubs/p554-004.htm#en_us_publink100043583

Social Security and
Equivalent Railroad
Retirement Benefits(p12)

rule
This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits.
Social security benefits include monthly retirement, survivor, and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable.
Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits.
If you received these benefits during 2011, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits.
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Are Any of Your Benefits Taxable?(p12)

rule
Note.When the term "benefits" is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits.

To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of:
When making this comparison, do not reduce your other income by any exclusions for:
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Figuring total income.(p12)

rule
To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. If that total amount is more than your base amount, part of your benefits may be taxable.
If you are married and file a joint return for 2011, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable.
Deposit
If the only income you received during 2011 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable.
taxmap/pubs/p554-004.htm#id2011_id2010_w15102r1001
Pencil

Worksheet 2-B. Are Any of Your Benefits Taxable?

A.Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include
the full amount of any lump-sum benefit payments received in 2011, for 2011 and
earlier years. (If you received more than one form, combine the amounts from box 5
and enter the total.)
A.
 Note. If the amount on line A is zero or less, stop here; none of your benefits are
taxable this year.
  
B.Enter one-half of the amount on line AB.
C.Enter your taxable pensions, wages, interest, dividends, and other taxable incomeC.
D.Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for:
• Interest from qualified U.S. savings bonds,
• Employer-provided adoption benefits,
• Foreign earned income or foreign housing,
• Income earned in American Samoa or Puerto Rico by bona fide residents,
• Deductions for domestic production activities,
• Interest paid on student loans, or
• Qualified education tuition and fees
D.
E.Add lines B, C, and D and enter the totalE.
F.If you are:
 • Married filing jointly, enter $32,000
 • Single, head of household, qualifying widow(er), or married filing separately and you
  lived apart from your spouse for all of 2011, enter $25,000
 • Married filing separately and you lived with your spouse at any time during 2011,
  enter -0-
F.
G.Is the amount on line F less than or equal to the amount on line E?
  □ No. None of your benefits are taxable this year.
  □ Yes. Some of your benefits may be taxable. To figure how much of your benefits
      are taxable, see Which worksheet to use under How Much Is Taxable, above.
  
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Base Amount(p12)

rule
Your base amount is:
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Repayment of Benefits(p12)

rule
Any repayment of benefits you made during 2011 must be subtracted from the gross benefits you received in 2011. It does not matter whether the repayment was for a benefit you received in 2011 or in an earlier year. If you repaid more than the gross benefits you received in 2011, see Repayments More Than Gross Benefits, later.
Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Your repayments are shown in box 4. The amount in box 5 shows your net benefits for 2011 (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits are taxable.
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Tax Withholding and Estimated Tax(p12)

rule
You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. You can choose withholding at 7%, 10%, 15%, or 25% of your total benefit payment.
If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals.
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How Much Is Taxable?(p13)

rule
If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.
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Maximum taxable part.(p13)

rule
The taxable part of your benefits usually cannot be more than 50%. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
If you are a nonresident alien, 85% of your benefits are taxable. However, this income is exempt under some tax treaties.
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Which worksheet to use.(p13)

rule
A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. However, you will need to use a different worksheet(s) if any of the following situations applies to you.
  1. You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits.
  2. Situation (1) does not apply and you take one or more of the following exclusions:
    • Interest from qualified U.S. savings bonds (Form 8815),
    • Employer-provided adoption benefits (Form 8839),
    • Foreign earned income or housing (Form 2555 or Form 2555-EZ),
    • Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents,
    • Deductions for domestic production activities, or
    • Interest paid on student loans,
    • Qualified education tuition and fees.
    In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits.
  3. You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. See Lump-sum distributions, later.
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How To Report Your Benefits(p14)

rule
If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. You cannot use Form 1040EZ.
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Reporting on Form 1040.(p14)

rule
Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. If you are married filing separately and you lived apart from your spouse for all of 2011, also enter "D" to the right of the word "benefits" on line 20a.
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Reporting on Form 1040A.(p14)

rule
Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. If you are married filing separately and you lived apart from your spouse for all of 2011, also enter "D" to the right of the word "benefits" on line 14a.
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Reporting on Form 1040NR.(p14)

rule
Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8.
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Benefits not taxable.(p14)

rule
If you are filing Form 1040EZ, do not report any benefits on your tax return. If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2011, also enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.
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Lump-Sum Election(p14)

rule
You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2011 in your 2011 income, even if the payment includes benefits for an earlier year.
Deposit
This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax. For more information about the lump-sum death benefit, visit the Social Security Administration website at www.SSA.gov, and use keyword: death benefit.
Generally, you use your 2011 income to figure the taxable part of the total benefits received in 2011. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits. See Publication 915 for more information.
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Repayments More Than Gross Benefits(p14)

rule
In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year.
If you have any questions about this negative figure, contact your local Social Security Administration office or your local U.S. Railroad Retirement Board field office.
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Joint return.(p14)

rule
If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. You do this to get your net benefits when figuring if your combined benefits are taxable.
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Repayment of benefits received in an earlier year.(p14)

rule
If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year.
If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Claim it on Schedule A (Form 1040), line 23.
If this deduction is more than $3,000, you have to follow some special instructions. See Publication 915 for those instructions.