Question: You just answered a question in the paper that was about collecting Social Security. How do I decide about having taxes taken out of my Social Security?

Answer: My favorite answer is “It Depends!” I will say that to this question as well. There are some concrete factors to consider.

I know that tax season just ended, so maybe completing that tax return has also given you some items to ponder, such as adjusting your paid taxes or change your withholding to better represent your current situation?

The first factor to consider is how much income you have and where does it come from? If your only source of income is Social Security, you do NOT have to file a tax return for the Internal Revenue Service (IRS). Your Social Security is not taxable if it is your only source of income.

Most seniors have other income above and beyond Social Security, including pensions, interest, dividends, etc. In many situations, that other income has income taxes taken out of it, such as income from wages or disbursements from your IRAs.

For those seniors that collect Social Security and other income, there are some rules of thumb that can be considered.

The first is that IRS rules state that no one pays income tax on more than 85 percent of their Social Security benefits. If you file as an individual on your federal tax return and your income is below $25,000 you would pay no income tax. If your income is between $25,000 and $34,000 you may have to pay income tax on up to 50 percent of your Social Security Benefit. If your income is above $34,000 you may have up to 85 percent of your Social Security Benefit count as taxable income.

When you file a joint return, if your income is below $32,000 you would pay no income tax. If your combined income is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent percent of your Social Security Benefits. If your combined income is above $44,000 you may have to pay income tax on up to 85 percent of your Social Security Benefits.

If you are married and file separate returns you most like will pay taxes on your Social Security Benefits.

These numbers obviously factor in the income from other sources. You also may have deductions and credits that apply to your situation. So there are many factors to consider. If you have income from sources besides Social Security, you may have to file a federal and state tax return. Each state has different laws in regard to taxes, and New York state has many income sources that are exempt from taxes.

Sources that are taxable in New York state and the IRS are private pensions, dividends, investment incomes, wages, and capital gains, to name just a few. For seniors that are still working and collecting social security there may also be credits that you are eligible for.

Your question was “Should you have taxes take out of your social Security?” If you have taxes taken out and your income is low, you must file a tax return each year to receive those dollars back, if you are due a refund. Filing a tax return can be costly. If you usually get all the money you have paid back in the form of a refund, it may make sense to stop having the taxes taken out. That would save you the cost of paying to have your taxes return completed.

If you get most of your paid income tax back in the form of a refund, you may choose to stop having it withheld and then when you file your taxes, you would simply pay the tax bill at that time.

Some people LIKE getting a tax refund each year. I do not feel this way. I like the idea of keeping my money and then paying it in April if necessary. Others feel differently. They like getting that big refund once a year, which provides money they can use to do something special or extra; money they are not good about saving themselves. If you are having taxes taken out, just to get a lump sum payment in the form of your refund, I have to ask, why do it that way? Why not just save the money yourself? Put a few dollars away in a saving account or envelope and then when tax day rolls around, grab the envelope, or go to the bank and celebrate all you have! If you need to pay a little bit, take it out of the envelope, and if you don’t have to pay, you have your money all the time and don’t have to wait to get it back.

I also want to touch on resources available to you. Of course the IRS is a very useful resource. They have a toll free number 1-800-829-3676. They also have a website www.irs.gov. This website has all kinds of question and answer format type information available. If you can’t find the answer to your question using the website or if you don’t use a computer you can always call the toll free number. The IRS staff is very knowledgeable about taxes and can help guide your decision-making. They can answer the questions you may have about income tax withholdings.

You can change your income tax withholding anytime you wish. You simply file a new W-4V with the IRS.

This form indicates what percentage (if any) you want withheld. There are defined percentages, 0, 7, 10, 15 or 25 percent. You cannot designate a flat dollar amount or any different percentages. These are the only amounts allowed by the IRS with regard to your Social Security Benefits.

You can and should talk with your trusted financial person. Your situation is different now that you are not working. You can change your withholding on any of your sources of income based on the total income you receive. That is a fluid number and changes as you age. Therefore, it is appropriate to revisit the discussion about your withholdings.

You just submitted your income tax return for 2016 (at least I hope you did). Use that experience and knowledge to adjust your income tax withholding amounts. You can make that withholding go up or down in value as is appropriate for your situation.

Use this opportunity to make a decision for how the 2017 filing will go. Review, research the options and change it if appropriate.

To contact Janell Sluga, GCMC with questions or concerns, please call 720-9797 or e-mail her at janells@lutheran-jamestown.org.