Ask the Expert: Withholding taxes from Social Security benefits

Shortly after my wife began receiving her Social Security benefit, we were surprised to be hit with a large tax bill when filing our tax return. Taxes hadn’t been withheld from her benefit. Now that I am about to file for my Social Security, I'm wondering what is the best way to prevent a surprise tax hit?

When you file your application, you can ask the Social Security Administration to withhold a percentage of your monthly benefit for taxes.

A person who's already receiving Social Security can make the same request by filing Form W-4V, which can be downloaded from the Internal Revenue Service website. Return the form to your local Social Security office, by mail or in person.

Most people who have no income other than Social Security don't owe any taxes on their benefits. But if you do have other income — such as distributions from retirement accounts or interest and dividends from investments — up to 85% of your benefit may be taxable. (Don't read that too fast! It doesn't mean that you might lose 85% of your benefit to taxes. It means that 85% of your benefit might be taxable as ordinary income, in which case 15% of your benefit would be tax free.)

The IRS provides an online interactive assistant to help you determine whether your benefit is taxable. The basic formula starts with your "provisional income." That's half of your Social Security plus all your other income, including any tax-exempt interest. If you're an individual taxpayer and your provisional income is more than $25,000, or married filing jointly and your provisional income is more than $32,000, some of your Social Security benefit is taxable.

The bottom line

You can have some of your Social Security benefit withheld for taxes if you wish.

More information

bit.ly/IRSsocialsecurityrailroadbenefits

bit.ly/SSAretirementplannertaxes