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Wiley Tax Preparer: A Guide to Form 1040 by The Tax Institute at H&R Block

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CHAPTER 9

Social Security and Equivalent Railroad Retirement Benefits

A taxpayer may receive Social Security benefits as a retiree, as a disabled person, or as a beneficiary. The benefits may be totally or partially tax free. Up to 50% or 85% of the total benefits may be taxable, depending on whether the taxpayer's other income exceeds certain base amounts.

Similar tax treatment applies to tier 1 Railroad Retirement benefits but not to tier 2 Railroad Retirement benefits (the discussion of which is beyond the scope of this book).

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ALERT: Although Supplemental Security Income (SSI) benefits are paid by the Social Security Administration (SSA), they should not be confused with Social Security benefits (i.e., typical Social Security income reported on SSA-1099).
SSI benefits are funded through general tax revenues, not through Social Security taxes, and are paid to eligible recipients who have limited income and limited resources. As with any payments made from a public welfare fund based on need, SSI benefits are not taxable and are not reported on Form SSA-1099 or on the recipient's tax return.

Social Security Benefits

Whether any benefits are taxable depends on the amount of benefits as well as other income, including tax-exempt interest, and the taxpayer's filing status. The age of the recipient has no bearing on whether the benefits are taxable. Thus, a taxpayer who starts ...

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