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Four Social Security and Medicare Tax Tips for 2024

Four Social Security and Medicare Tax Tips for 2024

January 28, 2024

Many readers will soon start gathering their tax-related documents in preparation for tax filing by April. Here are some things to consider if you are collecting Social Security and Medicare benefits.

Appeal the IRMAA

Notices went out in November telling all Social Security and Medicare beneficiaries how much their new COLA-adjusted Social Security benefit will be and by how much it will be reduced for their 2024 Part B premium. If income in 2022 exceeded the 2024 IRMAA thresholds—$103,000 for single individuals, $206,000 for married couples—they will be charged the IRMAA. The letter goes on to explain how to appeal the IRMAA using Form SSA-44. Importantly, the appeal must be filed within 60 days of receiving the letter. The 60-day countdown starts five days after the date on the letter. However, the letter says it does allow for late appeals “with good reason.”

Watch For Form SSA-1099

This form shows the total amount of benefits paid in 2023 for tax reporting purposes. The amount in Box 5—the full amount of Social Security paid, minus any benefits repaid to SSA—is what will go on Line 6a of Form 1040. The taxable portion will go on Line 6b. For most families, whose other income plus half the Social Security is well in excess of the $34,000 (single) or $44,000 (joint) threshold, this will be 85% of the full amount.

Figuring the taxable amount of Social Security income is one of the functions of tax preparation software, whether you do your own taxes or have them done by a tax preparer. If you lose, misplace, or otherwise don’t have your 1099, you can get a replacement through your Social Security account after January 31.

Adjust Withholding If Necessary

New Social Security recipients may yet be figuring out how much they should prepay in taxes, whether through voluntary withholding or estimated tax payments. You can adjust withholdings any time with IRS Form W-4V. Clients can select one of four different withholding rates—7%, 10%, 12%, and 22%—which will be applied to the entire benefit amount (not the 85% that is taxable). For some high-income couples, this maximum withholding still may not be enough, in which case they may need to make up the difference via estimated tax payments or extra withholding at work.

Plan for 2026 IRMAA

Yes, IRMAA planning for two years hence starts now, as 2024 income will determine 2026 Medicare premiums. Will you be able to keep your MAGI (AGI plus tax-exempt interest) below the first IRMAA threshold? We don’t know yet what the 2026 thresholds will be, but you could safely add about 5% to the current thresholds, which would bring them up to around $108,000 and $216,000. If avoiding the IRMAA entirely is not possible, take a look at the other thresholds, add about 5% for inflation, and try to avoid going over into the next tier. Or, maybe this will be a year to bite the bullet and do a Roth conversion and pay the taxes (and IRMAA if already on Medicare) on that big IRA distribution to reduce future RMDs and future IRMAAs. You might want to talk with an experienced fiduciary financial planner who offers tax advice, like me, to clarify your options. If you are interested, I would love to talk with you about it. Let’s set up a quick Zoom meeting to get acquainted. Just follow this LINK to find a time that works for you.

Any of these topics can be confusing. And, your options depend on several factors in your overall financial life. If you feel like you would benefit from a visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor to help better understand your options. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.

I am a financial planner who is an advocate for my clients ALL THE TIME – a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.

And yes, I’m still taking on a few great families to be part of my financial planning practice.

Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.