Is Tax Withholding Required on Social Security Benefits?

It sounds like your client received some incorrect information regarding the need to have taxes deducted from her Social Security benefits. Here’s how tax withholding on Social Security works and what she can do if she wants to stop the deductions:

1. Voluntary Tax Withholding:

   • Not Required: Taxes are not automatically required to be withheld from Social Security benefits. Instead, it’s a voluntary choice. Beneficiaries can choose to have a percentage of their Social Security benefits withheld for federal income taxes, but it is not mandatory.
   • Form W-4V: If your client was told she had to have taxes withheld, it’s likely that someone suggested this as an option, not a requirement. To request withholding, beneficiaries fill out IRS Form W-4V, which allows them to specify a withholding rate of 7%, 10%, 12%, or 22% of their benefits.

2. How to Stop Withholding:

   • Reversing the Decision: If your client has already submitted Form W-4V and wants to stop the withholding, she can do so at any time. She simply needs to submit a new Form W-4V and indicate that she no longer wants taxes withheld from her benefits.
   • Submitting the Form: The updated Form W-4V can be found online on the IRS website. Once completed, it should be submitted to her local Social Security office. The form will instruct the SSA to stop withholding federal income taxes from her Social Security benefits.

3. Why Withholding Might Be Suggested:

   • Tax Planning: Sometimes, withholding taxes from Social Security benefits can be a useful strategy for managing tax liability, especially if a person expects to owe taxes at the end of the year. However, it’s entirely optional and based on personal preference and tax planning needs.
   • Income Considerations: Your client’s income, including her small pension and $30,000/year from full-time work, may result in part of her Social Security benefits being taxable. However, whether or not to withhold taxes from her Social Security is her decision, not a requirement.

In summary, your client does not have to have taxes deducted from her Social Security benefits unless she chooses to. If she’s been advised to do so and disagrees, she can stop the withholding by submitting a new Form W-4V to her local Social Security office. It’s entirely her choice based on her tax planning needs. Let me know if you need further clarification or assistance!