Taxable Social Security Benefits

[fred2020]

My client has a taxable interest amount of $4,450; Combined Social Security benefits of $92,240 on form 1040 line4b; Pension amount on line 5b; and Social Security benefits of $55,560.

The ProSeries worksheet shows that the taxable social security benefit is $0 on line 6b of the form 1040. The IRS agents are saying part of the social security is taxable.

I have checked IRS publication 915 and that was not helpful.

Can any professional agent help?. Thank you.

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[BobKamman]

What year are you talking about?  A return has already been filed and a math-error notice received?  And how much was the pension?

[fred2020]

For 2025 form 1040

[fred2020]

Sorry the pension amount is $9,932

[Just-Lisa-Now-]

single or MFJ?

maybe you can lay it out better,

Interest 4450

Pension 9932

and total SS is how much?

[IntuitDavidD66]

Can you clarify the amounts:

Taxable Interest $4,450

Pension  $ 9,932

Combined Social Security Benefits Line 6a =  ????

Line 4b is Taxable IRA distributions.  Is that $92,240?

[fred2020]

Hi Lisa, I did input the SS amount on the original post. The SS amount is $55,560 and filing status is MFJ.

[fred2020]

Hi Bob, the SS amount is $55,560 and the filing status is MFJ. The IRS is saying most of the SS benefits is taxable the Proseries worksheet indicate a $0 taxable amount.

[Just-Lisa-Now-]

whats the 92,240 amount represent in the original post?

[Just-Lisa-Now-]

Shouldnt be anything taxable with so little income MFJ, you must be missing something.

[IntuitDavidD66]

If IRA Distributions line 4b is $92,240, then taxable social security is $47,226.

[BobKamman]

@Just-Lisa-Now- Try it with the  "combined Social Security benefits of $92,240" from the original post and see if it comes out to 52,560 taxable.  

Must be an early paper return, perhaps prepared when there was a glitch in the program.  

[Just-Lisa-Now-]

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@IntuitDavidD66 wrote:

If IRA Distributions line 4b is $92,240, then taxable social security is $47,226.

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with that much income, of course you'll have a large portion of SS thats taxable

[Just-Lisa-Now-]

Until Fred can provide some solid numbers, this is fruitless

[Just-Lisa-Now-]

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@BobKamman wrote:

@Just-Lisa-Now- Try it with the  "combined Social Security benefits of $92,240" from the original post and see if it comes out to 52,560 taxable.  

Must be an early paper return, perhaps prepared when there was a glitch in the program.  

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still doesn't add up, unless Fred believed the BIG LIE that SS isnt taxable...and that seems like an awfully huge amount of SS for someone that only has a 9k pension, and till wouldnt create any taxable income!

[fred2020]

Hello Bob and Lisa, I can understand why the numbers does not seem correct to you. The taxpayer is a retired engineer 83 years old who invested when he was working and his wife is 77 years old. They do not have any earned income except their IRAs, Pension, SS incomes and interests and dividends on their savings.

I am very surprised that 2025 Proseries is not calculate the taxable SS income correctly. The IRS did their calculations and reduced t/p refund by nearly $6,000. My responsibility is how to explain correctly to the T/P why their refund was reduced by that much.

Thank you for your understanding.

[Just-Lisa-Now-]

Fred,

And we cant tell you either because you haven't given us the figures you used on the return or you missed some income and IRS caught it, creating more taxable SS income.

Its not a magic trick, you should be able to follow the money through the return and see how it gets calcuated.

[BobKamman]

And now we have "interest and dividends," not just interest.  Still wondering where the $92,000 number comes from -- even for a couple, seems high unless there is an amount from previous year.  Maybe one of them got the Biden Bonus?

[fred2020]

Hello, the only numbers you do not have is a rental property losses of $29,700 and their Schedule A information. It's interesting that my Proseries worksheet for the taxable amount of the SS income is still computing the taxable amount correctly even after updating the software.

[fred2020]

Again, the $92,240 are from 5 IRA distributions Line 5b and the SS Amount is $55,560, Line 6a. Do you know where to research  and compute manually the computation of the SS taxable amount. Pub 915 does not do it!!

[BobKamman]

They had $92,000 of IRA distributions and didn't expect to owe any tax on their Social Security?  When was the return done, first week of February?   

[fred2020]

Please the $92,240 is from Line 4b IRA Distribution; the SS amount is 55,560, Line 6a.

[Just-Lisa-Now-]

and you entered both of those figures into the program?   

It would have definitely computed taxable SS income if you entered both of those amounts where they go.  Look!

[fred2020]

WOW!! I made an honest mistake i will never forget. I am sharing with you so other professional do NOT do that. On the SS Worksheet i checked the box that T/P are US citizens but are from other countries. The boxes above taxpayer and spouse. I have never done that before. I have using proseries for over 20 years. What a shame!!!

[fred2020]

Bob and Lisa, thank you for taking the time to help me. Actually, i mistakenly checked the boxes that t/p and spouse were US citizens but resident in foreign countries. I have used proseries for over 20 years and have never made such a mistake plus an error. I am a human being. Very Sad!!!

[Just-Lisa-Now-]

Ive seen other tax professionals accidently mark that box as well, youre not the first one!

For what its worth, I always use the Two Year Comparison worksheet once Ive completed the return, It helps me see if anything that was there last year is missing this year.

When i get a new client, I use the same Worksheet to input their prior years figures (I wont file a current year return without seeing the prior years), then I have something to compare this years figures to. 

Its saved me SO many times with silly things like this!

Hopefully your clients will be understanding, were all human!

[Accountant-Man]

Using the Two Year Comparison is a MUST!

LALY. Look At Last Year.

[BobKamman]

@Accountant-Man  Of course, comparing it to last year won't catch the same mistake you've been making consistently since the client was new. 

The only new clients I take are those sent to me by a private fiduciary who picks up clients through conservatorship or probate appointments.  One of them this year had a mistake on last year's state return -- failure to claim a $2,500 deduction for a federal-government pension.  This used to be more costly when our top bracket was 8%; now with a 2.5% flat tax, it's not worth an amended return.  The previous preparer claims to be an EA and MA, with an office staff of half a dozen people.  Should I email her and suggest she take a refresher course in state taxes?  The taxpayer is still living, although incapacitated, and I don't want to create a situation that involves her.  

[Accountant-Man]

I would not contact her.

Funny story: many years ago I had a client, then lost them. 

Then I received an email from them asking if they could come back, and they did; however, they used an email chain from their newer, now former, CPA. His email was that his fees go up and that's life, but he hoped they didn't go back to that loser(meaning ME!) 

Apparently I screwed up and they shouldn't trust me. Without any more info than that, I figured out what I missed, and the state of NJ was correct in my error, and I never made that error again.

And the clients' fees went up again to me.

[sjrcpa]

@fred2020 The worksheet to compute taxable SS is in the 1040 instructions and I believe with the SSA-1099.

When I review returns I assume 85% of SS is taxable (because for almost all of my clients it is). If I see something different, I investigate.