Question

Problem 4-57 (LO. 4) Charles E. Bennett, age 64, will retire next year and is trying to decide whether to begin collecting his Social Security benefits at that time. His monthly benefits will increase if he defers his starting date for the benefits. He has asked you to estimate how much his income tax will Increase as a result of collecting Social Security. Charles and his wife Bernice B., file a joint return, have no other dependents, and claim the standard deduction. Their only income other than the Social Security benefits are: Interest and dividends $6,000 Taxable pension $40,000 The Social Security benefits for the year would be $12,000. Enter all amounts as positive numbers. a. Complete Worksheet 1, Figuring Your Taxable Benefits, included in IRS Publication 915 to determine the taxable portion of this couple's taxable Social Security benefits (the publication includes a blank worksheet), Worksheet 1. Figuring Your Taxable Benefits Keep for Your Records Before you begin: • If you are married filing separately and you lived apart from your spouse for all of 2018, enter "D" to the right of the word "benefits" on Form 1040, line 5a. • Do not use this worksheet if you repaid benefits in 2018 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2018 (box 3 of Forms SSA-1099 and RRB-1099). None of your benefits are taxable for 2018. For more information, see Repayments More Than Gross Benefits . If you are filing Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989, do not include the amount from line 2b of Form 1040 on line 3 of this worksheet. Instead, include the amount from Schedule B (Form 1040), line 2 1. Enter the total amount from box 5 of ALL your Forms SSA-1099 and Check My Work Pre

Answer 1

a.

Charles E. and Bernice B. Bennett

Worksheet 1. Figuring Your Taxable Benefits Keep for Your Records Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2016, enter "D" to the right of the word "benefits" on . Do not use this worksheet il you repaid benefits in 2016 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2016 (box 3 of Forms SSA-1099 and RR8-1099). None of your benefits are taxable for 2016. For • if you are filing Form 8816, Exclusion of Interest From Series EE and I u.8. Savinga Bonda lasued After 1980, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Instead, include the amount from Schedule B (Form 1040A or 1040), line 2 1. Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a or Form 1040A, line 14a 1. 12,000 2. Enter one-half of line 1 2. 6,000 3. Combine the amounts from: Form 1040: Lines 7, 8, 9, 10 through 14, 15, 16, 17 through 19, and 21 Form 1040A: Lines 7, 8, 9, 10, 116, 12b, and 13 3. 46,000 4. Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. 5. Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839 line 28 Foreign earned income or housing (Form 2555, lines 45 and 50; or Form 2555-EZ, line 18), and • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. 6. Cum ne lines 2, 3, 4, unus 6. 32,000 7. Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Furm TOVOA filers: Enllur U LITTO I Um Fur 1040A, line 16 and 17 7. 8. Is the amount on line 7 less than the amount on line 6? No. STOP) None of your social security benefits are taxable. Enter -O-on Form 1040, line 20b; or Fuim 1010A, line 140. Yes. Subtract line 7 from line 6 52.000 9. If you are Married filing jointly, enter $32,000 Single, head at household qualitying widowler), or married filing separately and you lived apart from for , 9. 32.000 Nute. If you are marreu filiny separately and you lived with your spouse at any time in 2016, skip lines 9 through 16; Multiply line 8 by 85% (0.85) and enter the result on line 17. Then go to line 18. 10. Is the amount on line 9 less than the amount on line 8? (stop) Nur uf your tents are laxaule. Enter-O-un Purm 1040, line 200; ur Un Purm 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2016, be sure you entered "D" to the right of the word "benefits" on Farm 10an, line 20 nr on Form 1040A lina 14a Yes. Subtract line 9 from line 8 .. 10. 20,000 11. Enter $12,000 if married tiling jointly: $9,000 if single, head of household, qualifying widow(er), or married Filing soparatoly and you lived apart from your spouso for all of 2016 11. 12.000 12. Subtract line 11 from line 10. If zero or less, enter-O- 12. 8,000 13. Enter the smaller of line 10 or line 11 13. 12.000 14. Enter one-half of line 13...... 14. 6,000 15. Enter the smaller of line 2 or line 14 ....... 15. 6,000 16. Multiply line 12 by 66% (0.66). If line 12 is zero, enter -- 16. 6,800 17. Add lines 15 and 16 17. 12,800 1A. Multiply line 1 hy A5% (0.05) 19. 10.2001 19. Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b; or Form 1040A, line 14b... 19. 10,200 if you received a jump-sur payment in 2010 mar was for an earlier year, aiso TIP complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit NU.