The Social Security Administration will begin mailing out 40 million forms on Jan. 4 telling recipients exactly how much they received during 1984, so they can determine whether their benefits are subject to federal income taxes.
Acting Social Security Commissioner Martha A. McSteen and Internal Revenue Service official Walter M. Alt said the forms are necessary because Congress last year made half the Social Security benefit taxable for a single taxpayer whose income, as spelled out in the law, is $25,000 or more, or a married couple filing jointly with income of $32,000 or more.
McSteen said about 10 percent of all Social Security recipients will be subject to the tax on their benefits, which is expected to raise $27 billion between 1984 and 1989. Starting Jan. 4, anyone with questions about the form or the information on it may call 900-200-1099 for a toll-free, recorded explanation.
In determining whether income meets the threshold for taxation of benefits, the recipient includes all regular income, plus tax-free interest and half his Social Security benefits. McSteen said tax-free interest is not taxed -- only used to determine whether the recipient meets the income threshold. Half the benefits or half the total in excess of the threshold -- whichever is smaller -- is taxable.
Here is an illustration. Normal adjusted gross income for a couple: $25,000. Add tax-free interest from municipal bonds, $4,000. Add one-half of an $11,400 Social Security benefit, $5,700. Total is $34,700. This exceeds the $32,000 threshold by $2,700. Taxable portion of the benefit: $1,350 (half the amount over the threshold). New adjusted gross for tax purposes: $25,000 plus $1,350.