Congratulations! You’ve started taking Social Security. You worked long and hard to build up that addition to your retirement income. Now, enjoy it.
Oh, by the way, there is that small matter of… taxes. What you receive from Social Security has been called a benefit, a payment, and a deposit. No matter what title you give it, the IRS calls it a paycheck, and depending on your income you may have to pay taxes on up to 85% of what you receive from Social Security every month.
It’s not required, but you have the option of having taxes withheld from your Social Security check just like you did when you were getting a paycheck at work. Some people choose that option to make sure the IRS doesn’t hit them with an underpayment penalty at tax time.
To have taxes withheld from your Social Security benefit, you need to file IRS form W4V, the Voluntary Withholding Request. You can ask for 7 percent, 10 percent, 12 percent, or 22 percent to be withheld. Those are the only choices.
Once withholding is set up on your Social Security payment, the decision is not chiseled in stone. If you find out later that withholding isn’t necessary to keep you in the good graces of the IRS simply submit a new W4V revoking the withholding option.