September 21, 2003|By Neil Downing | Neil Downing,KNIGHT RIDDER/TRIBUNE
Q. I was reading Neil Downing's article ... in regard to the heading, "Some Social Security benefits are taxable," and he kind of highlighted a few things. However, I was hoping to go into more detail in this area, and I thought perhaps he has a brochure or something that could be mailed out ... in regard to income matched up with benefits and what's taxable and what isn't.
- J.M., Easton, Pa.
A. The Internal Revenue Service has several booklets that offer details on this tricky issue.
They include Publication 575, Pension and Annuity Income; Publication 590, Individual Retirement Arrangements; and Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
For your free copies, visit your local IRS office, order them over the phone by calling the IRS toll-free at (800) 829-3676, or download copies from the IRS Web site: www.irs.gov
The subject you've raised is complicated, which is probably one reason so many MoneyLine readers ask about it.
Figuring out whether your Social Security benefits may be subject to federal income tax is also confusing.
Q. Are tax-exempt Roth (IRA) withdrawals counted against Social Security benefits?
-A.E. Somerset, Mass.
A. No. So when you're trying to figure out what portion (if any) of your Social Security benefits are subject to federal income tax, don't include tax-free withdrawals from Roth IRAs.
This is one of the features that makes a Roth IRA so attractive. Kevin McCormally, author of "Kiplinger's Cut Your Taxes" (Kiplinger Books; 522 pages; $14.95), puts it this way: "An advantage of the new Roth IRA is that, since qualified withdrawals are tax-free, that money can't push more of your Social Security benefits into the taxable range."
Neil Downing, a Providence Journal staff writer, is author of "The New IRAs and How to Make Them Work for You."
