IRS Publication 915 for 2022: Taxing Your Benefits

IRS Publication 915 is a guide for taxpayers who received Social Security or equivalent railroad retirement benefits for the 2022 tax year. It provides the worksheets and rules to help individuals determine if any portion of their benefits from the Social Security Administration (SSA) or the Railroad Retirement Board (RRB) is subject to federal income tax.

Determining If Your Benefits Are Taxable

Before any calculations begin, a taxpayer must first determine their “provisional income.” This figure is calculated by gathering several amounts from your financial records for the year. The calculation starts with your adjusted gross income (AGI) from your 2022 Form 1040, but you must modify this figure by adding back certain income exclusions you may have taken, such as foreign earned income or foreign housing deductions.

To this modified AGI, you must add any tax-exempt interest you received during the year, which commonly includes interest from municipal bonds. The final component to be added is one-half of the net Social Security or equivalent railroad retirement benefits you received. This net benefit amount is reported in Box 5 of your Form SSA-1099 or Form RRB-1099.

Once these components are summed, the result is your provisional income. You then compare this figure to the base amounts set by the IRS for the 2022 tax year, which vary by filing status. For individuals filing as single, head of household, or qualifying widow(er), the base amount was $25,000. For those married and filing a joint return, the base amount was $32,000. If your provisional income is at or below the base amount for your filing status, your benefits are not taxable.

Calculating the Taxable Portion of Your Benefits

If your provisional income exceeds your filing status’s base amount, a portion of your benefits will be subject to tax. The calculation uses a two-tiered system that determines whether up to 50% or up to 85% of your benefits are taxable. These percentages are part of a formula that establishes the taxable portion based on how much your provisional income exceeds certain thresholds.

If your provisional income is above the base amount ($25,000 for single filers; $32,000 for married filing jointly), up to 50% of your benefits may be taxed. Your taxable benefits are the lesser of two amounts: 50% of your total benefits or 50% of the amount by which your provisional income exceeds the base amount.

If your provisional income surpasses a second, higher threshold—$34,000 for single filers or $44,000 for married couples filing jointly—the calculation becomes more complex. This may subject up to 85% of your benefits to tax. The final taxable benefit amount is determined by a multi-step comparison on the worksheet, with a final cap ensuring that no more than 85% of your total benefits can ever be taxed.

Special Rules for Lump-Sum Payments

Receiving a lump-sum payment that includes benefits for prior years can complicate your tax situation. Taxpayers have two options for calculating the taxable portion of the payment and can choose the method that results in lower taxable income for the 2022 tax year.

The first option is to treat the entire lump-sum payment as 2022 income. The prior-year portions of the payment are combined with any benefits received for 2022, and the total is used in the standard taxability calculation for the current year.

A second, more complex method may be advantageous if your income in the prior year(s) was significantly lower than your 2022 income. This option allows you to calculate the tax on the prior-year portion of the benefits as if you had received the money in that specific year.

After performing this separate calculation, you compare the increase in tax it would have caused in the prior year to the increase in tax from including it in the current year. You select the method that produces the smaller tax liability, and the entire taxable amount is reported on your 2022 Form 1040.

Repayments of Social Security Benefits

Individuals are sometimes required to repay Social Security benefits they received in a prior year due to an overpayment. If you repaid benefits that you had included in your income in an earlier year, you could be eligible for a deduction or a credit to recover some of the tax you previously paid.

If the total amount you repaid in 2022 for a prior-year overpayment was $3,000 or less, you can take an itemized deduction for the repaid amount on Schedule A of Form 1040. This method provides a tax benefit only if you itemize deductions rather than taking the standard deduction.

When the amount repaid in 2022 exceeds $3,000, you have two choices for how to account for it. The first option is to take an itemized deduction for the full repayment amount on Schedule A, similar to the rule for smaller repayments.

The second option for repayments over $3,000 allows you to calculate a tax credit for the year of repayment. This involves re-calculating the prior year’s tax liability as if you had never received the overpaid amount. The difference between the tax you actually paid and the re-calculated tax is the amount of your credit, which you can then claim on your 2022 return.

Reporting and Paying Tax on Your Benefits

You must report the necessary figures on your 2022 tax return. You will enter the total benefits received, as shown in Box 5 of your Form SSA-1099 or RRB-1099, on line 6a of Form 1040. The calculated taxable portion of those benefits is then entered on line 6b.

Because taxes on these benefits are not automatically withheld, you may owe a substantial amount when you file your return if you do not plan. To avoid this, you can arrange to have taxes paid throughout the year. One method is to request voluntary withholding from your benefits by completing Form W-4V, Voluntary Withholding Request, and submitting it to the Social Security Administration. You can choose to have 7%, 10%, 12%, or 22% of your monthly benefit withheld.

Another method for paying the tax is through estimated tax payments. Using Form 1040-ES, Estimated Tax for Individuals, you can calculate your expected tax liability for the year and pay it in four quarterly installments. This ensures that your tax obligation on the benefits is met gradually, preventing a large tax bill and potential underpayment penalties.