125.Entitlement To Retirement, Survivors, And Disability Insurance Benefits

125.1What are Social Security benefits?

Social Security benefits are payments made under a social insurance program administered by the Social Security Administration. They are paid monthly by check or direct deposit to the beneficiary or to a representative payee if the beneficiary is incapable of managing his or her own funds (see Chapter 16).

125.2How can you receive retirement, survivors, and disability insurance benefits?

Retirement, survivors, and disability insurance benefits are Social Security benefits. In order to receive these benefits, you must file an application with us. You must also meet certain eligibility requirements.

125.3Are your Social Security benefits subject to taxes?

If you have substantial income in addition to your Social Security benefits, up to 85 percent of your annual benefits may be subject to Federal income tax.

The amount of benefits subject to Federal income tax is the smaller of:

  1. One-half of your benefits; or

  2. One-half of the amount by which your adjusted gross income, plus tax-exempt interest, plus one-half of your Social Security benefits exceeds:

    1. $25,000 if you are single;

    2. $25,000 if you are married and not filing a joint return and you did not live with your spouse at any time during the year;

    3. $32,000 if you are married and filing a joint return; or

    4. $0 if you are married and not filing a joint return and you did live with your spouse at any time during the year.

In January, we send you a Form 1099 (Social Security Benefit Statement), showing the amount of benefits you received in the prior calendar year. A worksheet (IRS Notice 703) is included for determining whether any portion of your Social Security benefits received is subject to income tax.

125.4What is your tax rate if you are a non-U.S. citizen?

If you are not a U.S. citizen or resident, Federal income taxes are withheld from your benefits. The tax is 30 percent of 85 percent of your benefit (an effective tax rate of 25.5 percent).

This tax rate is withheld from the benefits of all nonresident aliens, unless you live in a country with which the United States has a tax treaty. Tax treaties do not permit taxing of U.S. Social Security benefits (or provide for a lower tax rate).

125.5With what countries does the U.S. have tax treaties?

The United States has tax treaties with Canada, Egypt, Germany, Ireland, Israel, Italy, Japan, Romania, Switzerland, and the United Kingdom (defined as England, Scotland, Wales, and Northern Ireland). In addition, if you live in and are a citizen of India, your Social Security benefits are exempt from Federal taxes to the extent that your benefits are based on Federal, State or local government employment. (This list can change from time to time.)

125.6How do you know the amount of taxes withheld from your benefits?

At the end of each year, we send a Form 1042S (Social Security Benefit Statement) to each beneficiary. This statement shows the amount of taxes withheld from your Social Security benefits.

Last Revised: Apr. 18, 2006