ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, March 11, 1996 TAG: 9603130003
SECTION: MONEY PAGE: 6 EDITION: METRO
DATELINE: WASHINGTON
TYPE: CHANGES IN THE TAX LAW
SOURCE: DAVE SKIDMORE Associated Press Writer
CONGRESS TALKED A LOT ABOUT REVERSING PRESIDENT CLINTON'S 1993 TAX INCREASE on better-off Social Security recipients. But Congress never delivered.
So, 23 percent of the 44 million Social Security recipients will have to pay taxes on some portion of their 1995 benefits.
And many others will have to do some complex figuring just to make sure they don't owe any tax on their benefits.
If you get Social Security benefits, you should have received Form SSA-1099 in the mail by Jan. 31. IRS Notice 703, included with the form, has a worksheet. Publication 915 has more information.
Up to half of your benefits will be subject to tax if your other income plus half your Social Security benefits totaled between $32,000 and $44,000 (for married taxpayers filing jointly) or between $25,000 and $34,000 (for single taxpayers).
Up to 85 percent of your benefits will be subject to tax if your income - including half your benefits - was more than $44,000 (married filing jointly) or more than $34,000 (single).
Here is how to determine whether some of your benefits will be taxed:
Add all the taxable income items you listed on the front of your tax return, except Social Security. Subtract any adjustments, such as IRA contributions, alimony you paid and half your self-employment tax. Add any tax-exempt interest and half your 1995 Social Security benefits.
Compare this new total with the lowest of your two ``base amounts.'' For a married couple filing a joint return, the two base amounts are $32,000 and $44,000. If you are a married person filing separately who lived with your spouse at any time in 1995, you have one base amount - zero. For all other filers, the two base amounts are $25,000 and $34,000.
If the total in Step 1 is less than the lowest base amount, none of your Social Security benefits is taxable.
If Step 1 is between the two base amounts, then you pay taxes on the smaller of either half your Social Security, or half the difference between Step 1 and your smallest base amount.
If the result of Step 1 is bigger than the largest base amount, then go to Step 3.
Step 3 is to add 85 percent of the difference between Step 1 and your largest base amount plus the smaller of either half your Social Security, or half the difference between Step 1 and your smallest base amount, or half the difference between your two base amounts.
You pay tax on the smaller of either the result of Step 3 or 85 percent of your Social Security.
The taxable amount is entered on Line 20b of Form 1040 or on Line 13b of 1040A. If any part of your Social Security is taxable, you may not use Form 1040EZ.
If you're a low-income person and either totally disabled or 65 or older, you may qualify for a special tax credit of up to $1,125.
If both you and your spouse qualify, your combined adjusted gross income must be less than $25,000 and you must have less than $7,500 nontaxable Social Security and pension income. The limits are $20,000 and $5,000 if only one spouse qualifies; $17,500 and $5,000 for single people; and $12,500 and $3,750 if you're married, don't live together and file separate returns.
You'll need to fill out Schedule 3 if you use Form 1040A or Schedule R if you use Form 1040. See Publication 524 for more information.
LENGTH: Medium: 73 lines ILLUSTRATION: GRAPHIC: Illustration. Chart. color.by CNB