It’s a New Year!
Here are some things you may need to know for 2020.
- People that are working and collecting a Social Security benefit (other than disability) have earnings limits until the month they turn full retirement age.
- If under full retirement age for all of 2020, Social Security deducts $1 from their benefit payments for every $2 that they earn above $18,240.
- If turning full retirement age in 2020, Social Security deducts $1 in benefits for every $3 earned above $48,600 BUT – Social Security only counts earnings before the month of attainment of full retirement age.
- If your earnings in 2020 are well over the limit BUT they are retiring in 2020, there is a special monthly earnings limit rule that applies in the first year only.
- The standard monthly Medicare Part B premium in 2020 is $144.60/ month. However, if you have higher income you may pay more than the standard premium. If you file taxes as “married, filing jointly” and your MAGI is greater than $174,000, you will pay a higher premium. If you file taxes using a different status, and your MAGI is greater than $87,000, you will pay higher premiums.
- Social Security beneficiaries will receive their 2019 SSA-1099 by January 31. They can request a replacement 1099 online after February 1. You need this to determine if 50% or 85% of their Social Security benefits are taxable.
- If you file a federal tax return as an “individual” and your combined income is between $25,000-$34,000, you may have to pay income tax on 50% of your benefits and, if more than $34,000, up to 85% of your benefits may be taxable.
- If you file a joint tax return and your combined income is between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits and, if more than $44,000, up to 85% of your benefits may be taxable.
- If you do have to pay taxes on your Social Security benefits, you can choose to have federal taxes withheld from your benefits by completing Form W-4V.
The Q&A for the month:
Question: My client is a 61-year-old widow collecting Social Security from her deceased husband’s record. She is also working and will exceed the earnings limit this year and is anticipating having to pay back some of her benefits. My understanding is that if one has to pay back for this reason, it ends up increasing the future amount that they can draw. What I don’t know is if that is the case when drawing on a deceased spouse’s record. Can you confirm that the earnings limit applies to her and that she will have to pay back based on her overage? Also, if she does have to pay back, will it increase her future widow’s benefits?
Answer: The earnings limit does apply to her. The limit in 2020 is $18,240. We will deduct $1 from her benefit payments for every $2 that she earns above that limit. If she exceeds the earnings limit at any point from age 60 to full retirement age, we will adjust her benefit at her full retirement age. For example, if she filed for widow’s benefit at age 60, which is 76 months prior to her full retirement age of 66 and 4 months, when she turns full retirement age, we will look back and see if she ever went without a benefit because of excessive earnings. Let’s say she didn’t receive 4 months of benefits because of excessive earnings between age 60 and 66 and 4 months. At full retirement age, we will adjust that 76-month-reduction to a 72-month-reduction because of those 4 months.
For more details, check out the brochure at link below, page 6.