Maybe. Listed below are the responses from the IRS and Social Security. For up to date information on your specific set of circumstances, check with your tax professional.

IRS Tax Tip 2011-26, February 07, 2011

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA-1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
   
   
2. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
   
   
3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
   
   
4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
   
   
5. You can do the following quick computation to determine whether some of your benefits may be taxable:
   • First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
   • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
   
   
6. The 2010 base amounts are:
   • $32,000 for married couples filing jointly.
   • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
   • $0 for married persons filing separately who lived together during the year.

Here is Social Security's response:

Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:

• file a federal tax return as an "individual" and your combined income*is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.

  • more than $34,000, up to 85 percent of your benefits may be taxable.

• file a joint return, and you and your spouse have a combined income*that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits

  • more than $44,000, up to 85 percent of your benefits may be taxable.

• are married and file a separate tax return, you probably will pay taxes on your benefits.

*Note:

Your adjusted gross income + Nontaxable interest + ½ of your Social Security benefits = Your "combined income"

Each January you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax.

If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

For more information about taxation of benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on this website or by calling 800-TAX-FORM (800-829-3676).

Last updated on October 28, 2011 by stasiukfirm