MY HOMEPAGE: TAX RETURNS

TAX RETURNS

here is link for IRS general info and search

Categories of potential taxpayer covered:

Retirees

Students/student athletes

Gamblers

Home buyers

Donors/Charitable givers

Parents/those with Dependents/All other Tax Credits

Sick/Injured/those with significant Medical expenses

Military members/military families (State vs Federal issues)

Small business owners

Divorced couples

Content covered:

FILING STATUS (Identify whether it is required or recommended to file a return/Identify eligible dependents)

RETIREMENT + INT/DIVS

IF YOU KEEP WORKING PASSED THE RETIREMENT AGE THERE ARE BENEFITS

EXCESS RETIREMENT CONTRIBUTIONS ARE NOT A PROBLEM!

PENALTY FREE RET. ACCT. WITHDRAWALS NOT JUST FIRST TIME HOME PURCHASE BUT ALSO BIRTH OF A CHILD

RMD’S

LUMP SUM DISTRIBUTIONS

Form 1099R

IRA vs ROTH

Traditional IRA vs ROTH IRA

INTEREST AND DIVIDENDS (Analyze and summarize taxes due on interest and dividends/Analyze and summarize taxes due on interest and dividends).

WHEN TO FILE SCHEDULE B (INTEREST INCOME)

STUDENTS AND GAMBLERS

YOUR EMPLOYER CAN PAY YOUR STUDENT LOANS - UP TO A LIMIT

Student athlete income and self employment taxes

Student loan deduction

Student athlete income

Explain when gambling losses offset gambling winnings(Explain when gambling losses offset gambling winnings)

FEES ON EARLY WITHDRAWAL OF A CD INVESTMENT (EG TO BUY A HOUSE)

CHANGE IN CHARITABLE CONTRIBUTIONS

ADJUSTMENTS IN SCHEDULE 1

MEDICAL EXPENSES

QBI (Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI).

TAX CREDITS (Explain income limitations on credits; Determine eligibility for specific tax credits/Determine eligibility for specific tax credits)

GENERAL

REFUNDABLE CHILD TAX CREDIT PORTION

CHILD AND DEPENDENT CARE CREDIT / CHILD CARE CREDIT

AGI ADJUSTMENTS AND EXCLUSIONS(Categorize sources of income as taxable or non-taxable/Identify exclusions and other adjustments to gross income/Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions)

TAXABLE OR NON TAXABLE INCOME (Categorize sources of income as taxable or non-taxable)

INCLUSIONS VS EXCLUSIONS(income from Various Sources: Identifying and correctly classifying different types of income, including foreign income, rental income, and side-gig income, can present difficulties/Identify exclusions and other adjustments to gross income/Categorize common transactions as exclusions or deductions from gross income/Calculate adjusted gross income based on exclusions)

REPORTABLE INCOME VS TAXABLE INCOME VS NON TAXABLE EXCLUDED INCOME (EXCLUSIONS) (explain the difference between reportable and taxable income)

MISCELLANEOUS INCOME(Identify miscellaneous sources of income/Incorporate miscellaneous sources of income into gross income)

AGI / ALIMONY / SALE OF RESIDENCE

FEDERAL VS STATE (Identify the differences in item treatments between federal and state, or between states).

ENROLLED AGENTS AND CPA’S.

TAXATION (Taxation calculations/FORM 1040 (Prepare a 1040 form based on common tax situations/Prepare a 1040 form based on common tax situations/what income is reportable vs not?/what expenses are deductible vs not?)

Prepare a 1040 form based on common tax situations (Apply the basic income tax formula for individuals)

Taxation (138/300) 46% what does this cover??

Identify common deductions, including alimony, IRA, student loan interest, educator expenses, and penalty on early withdrawal of savings

Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions

PERSONAL DEDUCTIONS/EMPLOYEE DEDUCTIONS/BUSINESS DEDUCTIONS (Research and explain whether or not an item is deductible/Employment and Business Expenses: Determining which expenses are deductible, especially for self-employed individuals or those with complex employee expense situations, often involves detailed knowledge of IRS guidelines. Deductions: Navigating the nuances of different deductions (like itemized vs. standard)/Research and explain whether or not an item is deductible)

IS THIS COVERED?: Capital Gains and Losses: Varying rules for short-term versus long-term gains.

Table of Contents

FILING STATUS (Identify whether it is required or recommended to file a return/Identify eligible dependents)
RETIREMENT + INT/DIVS (Determine eligibility requirements for IRA contributions/Explain IRA conversions, rollovers and contributions/Explain RMD/Identify key elements of Form 1099R/Reporting retirement distributions/ROTH IRA, Traditional IRA and 1099R/Understand tax implications of social security lump sum distributions/Evaluate social security income situations based on filing status and personal information/Interpret 1099-SA and accurately apply the income to the 1040/Evaluate social security income situations based on filing status and personal information/Explain Rollovers and Excess Contributions/Identify key elements of Form 1099R/Reporting retirement distributions/Reporting retirement distributions OI_6796/Understand tax implications of social security lump sum distributions/Roth IRA - Traditional IRA - 1099-R/Explain RMD/Identify situations in which there is an early withdrawal penalty/ RETIREMENT DISTRIBUTIONS UNDER OI_6796/Interpret 1099-SA and accurately apply the income to the 1040/Evaluate social security income situations based on filing status and personal information/Identify key elements of Form 1099R)

IF YOU KEEP WORKING PASSED THE RETIREMENT AGE THERE ARE BENEFITS
EXCESS RETIREMENT CONTRIBUTIONS ARE NOT A PROBLEM!
PENALTY FREE RET. ACCT. WITHDRAWALS NOT JUST FIRST TIME HOME PURCHASE BUT ALSO BIRTH OF A CHILD
RMD’S
LUMP SUM DISTRIBUTIONS
Form 1099R
IRA vs ROTH
Traditional IRA vs ROTH IRA
INTEREST AND DIVIDENDS (Analyze and summarize taxes due on interest and dividends).
when to file SCHEDULE B (interest income)

STUDENTS AND GAMBLERS

YOUR EMPLOYER CAN PAY YOUR STUDENT LOANS - UP TO A LIMIT
Student athlete income and self employment taxes
Student loan deduction
Student athlete income
Explain when gambling losses offset gambling winnings(Explain when gambling losses offset gambling winnings)

PARENTS/THOSE WITH DEPENDENTS + TAX CREDITS (Explain income limitations on credits; Determine eligibility for specific tax credits/Determine eligibility for specific tax credits)

GENERAL
REFUNDABLE CHILD TAX CREDIT PORTION
CHILD AND DEPENDENT CARE CREDIT / CHILD CARE CREDIT

THE SICK/INJURED + THOSE WITH SIGNIFICANT MEDICAL EXPENSES (more than 7.5% of AGI)
MILITARY MEMBERS/MILITARY FAMILIES + FEDERAL versus STATE (Identify the differences in item treatments between federal and state, or between states).
To add to note based on some questions at bottom: police officers (what is non taxable in retirement) and clergy (how is free housing and related expenses and contributions treated).
SMALL BUSINESS OWNERS - QBI (Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI).
HOMEBUYERS - FEES ON EARLY WITHDRAWAL OF A CD INVESTMENT (EG TO BUY A HOUSE) - interest paid on mortgage and home equity debt are deductible. But the home mortgage interest is only deductible up to $750k principal of the mortgage loan/s. Remember that personal property taxes are deductible. (And SALT).
DONORS - CHANGE IN CHARITABLE CONTRIBUTIONS
TEACHERS
ENROLLED AGENTS versus CPA’S
AGI ADJUSTMENTS (sch1) AND EXCLUSIONS(Categorize sources of income as taxable or non-taxable/Identify exclusions and other adjustments to gross income/Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions)

TAXABLE OR NON TAXABLE INCOME (Categorize sources of income as taxable or non-taxable)
INCLUSIONS VS EXCLUSIONS(income from Various Sources: Identifying and correctly classifying different types of income, including foreign income, rental income, and side-gig income, can present difficulties/Identify exclusions and other adjustments to gross income/Categorize common transactions as exclusions or deductions from gross income/Calculate adjusted gross income based on exclusions)
REPORTABLE INCOME VS TAXABLE INCOME VS NON TAXABLE EXCLUDED INCOME (EXCLUSIONS) (explain the difference between reportable and taxable income)
MISCELLANEOUS INCOME(Identify miscellaneous sources of income/Incorporate miscellaneous sources of income into gross income)
AGI / ALIMONY / SALE OF RESIDENCE

TAXATION/FORMS/SCHEDULES: (Taxation calculations/FORM 1040 (Prepare a 1040 form based on common tax situations/Prepare a 1040 form based on common tax situations/what income is reportable vs not?/what expenses are deductible vs not?)

Prepare a 1040 form based on common tax situations (Apply the basic income tax formula for individuals)
Identify common deductions, including alimony, IRA, student loan interest, educator expenses, and penalty on early withdrawal of savings
Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions
PERSONAL DEDUCTIONS/EMPLOYEE DEDUCTIONS/BUSINESS DEDUCTIONS (Research and explain whether or not an item is deductible/Employment and Business Expenses: Determining which expenses are deductible, especially for self-employed individuals or those with complex employee expense situations, often involves detailed knowledge of IRS guidelines. Deductions: Navigating the nuances of different deductions (like itemized vs. standard)/Research and explain whether or not an item is deductible)
IS THIS ANYWHERE?: Capital Gains and Losses: Varying rules for short-term versus long-term gains.

********

FILING STATUS

Tax Filing Status:

Every year the IRS publishes a “return filing requirements chart" here https://www.irs.gov/individuals/check-if-you-need-to-file-a-tax-return#amount-to-file. Not everyone needs to file a return. 1) filing status 2) age at Dec31st 3) income limits. Filing status is based on who lives with you and who pays the household expenses.

(Identify whether it is required or recommended to file a return/Identify eligible dependents)

Based on the last day of the year (December 31)
Single: Unmarried; divorced or legally separated
Married Filing Jointly: Married or spouse passed away during the year
Married Filing Separately: Married and do not wish to file jointly
Head of Household: Unmarried or considered unmarried for tax purposes and paid more than half of living expenses for yourself and qualifying dependent
Qualifying Surviving Spouse: Spouse passed during the past 2 years and you have a dependent child

IRS consider a taxpayer married all year long if they were married as of December 31st. If a married couple lives apart for the last 6 months of the year they can file as "unmarried" (?).

If a parent pays for more than half of the cost to maintain a qualifying household and support a qualifying dependent child they are eligible to file as Head of Household. Otherwise most appropriate status is MFS or MFJ.

All of the 2024 filing requirements are in IRS Publication 501 here: https://www.irs.gov/pub/irs-pdf/p501.pdf

Updated 2025 Filing Thresholds

Based on the latest IRS inflation adjustments, here are the updated figures for 2025:

Category	2024 Threshold (Previous)	2025 Threshold (Updated)
Single Dependent (Earned)	$14,600	$15,750
Single Dependent (Unearned)	$1,300	$1,350
Head of Household	$21,900	$23,625
Single (under age 65)	$14,600	$15,750
Married Filing Jointly	$29,200	$31,500
Self-Employment Income	$400	$400 (remains the same)

MORE 2025 FILING LIMITS for elderly or widows (Gross Income Thresholds)

65 or older $17,750
65 or older (one spouse) $33,100
65 or older (both spouses) $34,700
Married Filing Separately Any age $5
Head of Household Over 65 $25,625
Qualifying Surviving Spouse Under 65 $31,500
65 or older $33,100

Considerations for above:

Gross income is defined as earned income ie salaries wages etc plus unearned income eg interest dividends etc.

Above are the minimum amounts requiring a return to be filed.

Other factors eg having net earnings from self-employment over $400 and other specific situations may necessitate the filing of a return. You may also opt to file even if you are below above limits, eg to claim refundable tax credits. OTHER REASONS: Can be claimed as a dependent by another taxpayer and have income over certain limits (e.g., unearned income over $1,350 or earned income over $15,750). Owe any special taxes, such as the alternative minimum tax. Wish to claim a refundable tax credit or get money back from income tax that was withheld from your pay. Received distributions from a Health Savings Account (HSA). Some people that are claimed on another’s return can still file a return themselves, e.g. if they want to bring about a refund.

***WHEN DECIDING ON MARRIED FILING SEPARATE or MFJ = choose which one yields a lower tax liability in aggregate. MFJ usually yields the better result. if not married then look at the other categories.

When is MARRIED FILING SEPARATELY BETTER? - When both spouses work and earn about the same amount, filing a joint return might put a couple into a higher tax bracket, while filing separately can result in a lower tax rate. If one spouse’s out-of-pocket medical expenses exceed 7.5% of AGI ie their individual adjusted gross income (AGI), but don’t exceed 7.5% of their joint AGI, they might be able to lower their taxes by filing separately and taking the medical deduction. When a couple’s AGI is too high to qualify for casualty losses in a federally declared disaster area, filing separately may make it possible for one spouse to claim the deduction and lower the couple’s overall tax bill. If one spouse has a large tax bill and the other is due a tax refund, filing separately can protect the refund. The IRS typically won't apply it to the other spouse's balance due.

SINGLE = divorced or legally separated under state law or widowed with no kids by January 1st and cannot qualify for head of household.

QUALIFYING SURVIVING SPOUSE - for one or two years after a spouse dies. Better than head of household for widow with kids??? So for a widow the order is QSS or HOH then SINGLE.

Some people that are claimed on another’s return can still file a return themselves, e.g. if they want to bring about a refund.

HEAD OF HOUSEHOLD = 1) paid for more than half the household expenses, or 2) unmarried. (UNMARRIED = paid for a child for more than half the year and will file their own return or their former spouse did not live with them for last 6 months; Note re submitting returns: A head of household person who is below income limit may still want to file in order to get the credits eg CTC, OEC, EITC.)

Text from Image 1: Child Income Tax Filing

In the US, whether a child needs to file their own income tax return depends on the amount and type of income they earned.

Here's a breakdown of the thresholds for the 2024 tax year (filed in 2025):

Earned Income: If the child's earned income (like wages, salaries, and tips) exceeds $14,600, they are required to file their own return.
Unearned Income: If the child's unearned income (like interest and dividends) exceeds $1,300, they are also required to file.
Combined Income: If the child has both earned and unearned income, they need to file if their total income is greater than the larger of these two amounts: $1,300 or their earned income plus $450.

Important Considerations:

Even if your child doesn't meet these thresholds, they might still want to file a return if they had federal income tax withheld from their paychecks, as they may be eligible for a refund.
Self-employment income: If a child has net earnings from self-employment of $400 or more, they must file a return and pay self-employment taxes, regardless of their total income.
Kiddie Tax: If a child's unearned income exceeds certain thresholds ($2,600 for the 2024 tax year), it may be subject to the "kiddie tax," where some of their unearned income is taxed at the parent's tax rate.
Reporting Unearned Income on Parent's Return: In some cases, parents can elect to report their child's unearned income (less than $13,000 for 2024, only interest and dividends) on their own tax return using Form 8814, according to the IRS. However, this might result in a higher tax burden for the parents depending on their income level.
Claiming as a Dependent: Even if a child files their own tax return, their parents can still claim them as a dependent if they meet the dependency requirements, according to Kiplinger.

Text from Image 2: Head of Household Status

Yes, in certain circumstances, a married person can file as Head of Household for tax purposes.

While generally, the Head of Household status is reserved for single filers, the IRS allows for a special rule to apply to married individuals who meet specific criteria for being "considered unmarried" at the end of the tax year.

Criteria to be Considered Unmarried for Head of Household Status

To be considered unmarried and potentially eligible for Head of Household status, even if legally married, you must meet the following requirements:

You file a separate tax return.
You paid more than half the cost of keeping up your home.
Your spouse did not live in your home for the last 6 months of the year (with exceptions for temporary absences).
Your home was the main home of your child, stepchild, or foster child for more than half the year.
You can claim the child as your dependent (with a possible exception for noncustodial parents).

Benefits of Filing as Head of Household

If you qualify, filing as Head of Household can offer tax advantages over filing Married Filing Separately, such as:

A higher standard deduction.
Lower tax brackets.
Eligibility for certain tax credits.

QUALIFYING DEPENDENTS:

Includes all of your kids, step kids, adopted kids, or any of your nephews or nieces. And could even include your younger siblings. Anyone claimed as a dependent needs a SSNo or an ITIN (or ATIN in case of adoption); if not can continue but the SSNo or ITIN has to be applied for by the return or extension due date at the latest. Dependent also includes any green card holders in the US; and also includes US citizen that reside in MEX or CAN.

STEP 1 for considering whether kids you take care of financially are dependents for tax purposes:

A QUALIFYING CHILD is a child who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them.

GEN RULES FOR DEPENDENTS:

must be a US citizen resident alien/national, or resident of Mexico or Canada. CANNOT BE CLAIMED AS DEPENDENT BY ANYONE ELSE. must be a qualifying child or relative. children as dependent must pass relationship, age, residency, support and joint return tests.

relative as dependent cannot be a qualifying child and must pass: member of household, or relationship gross income, and support tests.

2024 Child Tax Filing Thresholds (for returns filed in 2025)

Income Type	Filing Threshold	Key Details
Earned Income	$14,600	Includes wages, salaries, and tips.
Unearned Income	$1,300	Includes interest, dividends, and capital gains.
Combined Income	Special Rule	Larger of: $1,300 OR Earned income + $450.
Self-Employment	$400	Includes freelance work, gig work, or small business.

Key Rules & Forms to Remember

Kiddie Tax (Form 8615): If a child's unearned income exceeds $2,600, the portion above that amount is taxed at the parent’s tax rate rather than the child’s rate.
Parental Election (Form 8814): You can choose to report your child's interest and dividends on your return if the total is less than $13,000 and they have no other income.
Refunds: Even if your child earns less than the thresholds above, they should file a return if they had any federal income tax withheld. This is the only way to get that money back as a refund.
Dependency: A child filing their own return can still be claimed as a dependent by the parents, provided the parents provide more than half of their financial support.

Note: These figures apply specifically to the 2024 tax year. Because tax laws change annually, always verify with the latest IRS Publication 501 or a tax professional.

***THERE IS A PROCESS FOR DETERMINING QUALIFYING DEPENDENTS:

To determine if you can claim a person as a dependent on your 2025 Form 1040, the IRS uses a two-step "Filter" process. A dependent must first pass three universal "Standard Tests" and then qualify as either a Qualifying Child or a Qualifying Relative.

For 2025, the income threshold for a qualifying relative has increased to $5,200 (up from $5,050 in 2024).

Step 1: The Three Standard Tests

Before checking specific relationships, the individual must meet these three criteria:

Dependent Taxpayer Test: If you (or your spouse if filing jointly) can be claimed as a dependent by someone else, you cannot claim any dependents.
Joint Return Test: You generally cannot claim a married person who files a joint return with their spouse.
Citizen or Resident Test: The person must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.

Step 2: Determine the Category

If the person passes the Standard Tests, they must meet the specific requirements of one of the two categories below.

Category A: Qualifying Child (5-Part Test)

To be a qualifying child, the individual must meet all of the following:

Relationship: Your son, daughter, stepchild, foster child, brother, sister, half-sibling, step-sibling, or a descendant of any of these (grandchild, niece, nephew).
Age: Under 19 at the end of 2025; OR under 24 if a full-time student; OR any age if permanently and totally disabled.
Residency: Must have lived with you for more than half of the year (exceptions for school, military, or medical care).
Support: The child cannot have provided more than half of their own financial support.
Joint Return: The child cannot file a joint return (unless only to claim a refund of withheld tax).

Category B: Qualifying Relative (4-Part Test)

If they don't meet the "Child" tests (e.g., they are over 24 or are a parent/friend), they may be a Qualifying Relative:

Not a Qualifying Child: They cannot be your qualifying child or the qualifying child of anyone else.
Member of Household or Relationship: They must either live with you all year OR be on the IRS list of relatives who do not have to live with you (parents, grandparents, in-laws, aunts/uncles).
Gross Income: They must have earned less than $5,200 in gross taxable income in 2025.
Support: You must provide more than half of their total financial support for the year.

Comparison of 2025 Thresholds

Rule	2024 Amount	2025 Amount
Qualifying Relative Income Limit	$5,050	$5,200
Standard Deduction (Head of Household)	$21,900	$23,625
Child Tax Credit (Max)	$2,000	$2,200

Pro Tip: If you have a dependent who is not a "Qualifying Child" for the $2,200 credit (like an elderly parent or a 19-year-old non-student), you may still be eligible for the $500 Credit for Other Dependents.

OLDER NOTES: Preliminary work to prepare tax returns

Threshold for filing returns: A taxpayer does not have to file a return if his or her gross income is less than their standard deduction. (pub 501 section 6012(a)). Filing threshold for individuals and MFS is equal to the standard deductions which are $12,400 in 2020 (and $12,550 in 2021). For single individuals over 65 it is $13,850 standard deduction. For MFJ it is $24,800 in 2020 (and $25,100 in 2021).
Husband and wife can file joint return even where they have different accounting methods(!).
For deceased spouse, the surviving spouse can file a MFJ or MFS return for the year in question and the two subsequent years if the surviving spouse is living in the same house for the full year and has at least one child (dependent) – ie can get ‘qualifying widower’ status to file a married return as opposed to a single return. In the year spouse dies have to file married return, cannot be a single return. If no children automatically have to file a single return from the subsequent year onwards.
Head of household status only when pay more than 50% of household costs. Household costs include food paid for, rent paid, real estate taxes paid. Household costs for this purpose do not include any rent earned, any business income earned whilst working from home, the value of any ‘services’ provided to the home eg repairs, only the direct costs count.
Dependents are: kids or fulltime students under 24 (no matter how much part time income they make) or parents (living in the taxpayer’s home?) that earn less than $4,200 per year. Those earning less than the amounts below do not have to file a return.

· Qualifying child definition in detail

· Qualifying dependent definition in detail

Retirement

Basic Retirement Distributions

SSI: SS benefits may be taxable if the sum of half of your benefits and all your other income, including tax-exempt interest, exceeds a base amount determined by your filing status. These base amounts are:

$25,000 for single, head of household, or qualifying surviving spouse filers; $25,000 for MFS

if you lived apart from your spouse for the entire year; $32,000 for MF J; and $0 for MFS if you lived with your spouse at any time during the year

Traditional IRA and 401K: Distributions are reported on Form 1099-R. See instructions for reporting tax treatment.

IRA / 401K Distributions

Can withdraw penalty-free at age 59.5; must pay tax on distribution.

Early withdrawal penalty of 10% if under age 59.5; can avoid penalty if withdrawal is for first time home purchase, medical expenses, death / disability, educational, and more (see rules).

Required Minimum Distribution (RMD): Minimum amount a taxpayer must withdraw annually starting with the year they reach the age of 73 (2024) from their

IRA or retirement account.

RMD is based on life expectancy factors by the IRS and taxed as ordinary income. Failure to withdraw RMD amount by the due date will be subject to excise tax.

Roth IRA / Distributions

Contributions made to Roth IRA are made with after-tax dollars.

Can withdraw contributions and earnings penalty-free at age 59.5; no tax on distribution. Withdrawals must be taken after the 5-year Roth IRA holding period.

Early withdrawal penalty and tax if under age 59.5; can avoid penalty if withdrawal is for first time home purchase, medical expenses, death / disability, educational

Exceptions to the 10% Early Withdrawal Penalty

The Roth 5-Year Rule Clarified

RMD Age Update

I. Traditional vs. Roth IRA: Key Features

Feature

$25,000 for single, head of household, or qualifying surviving spouse filers; $25,000 for MFS if you lived apart from your spouse for the entire year;

$32,000 for MFJ; and $0 for MFS if you lived with your spouse at any time during the year

Traditional IRA and 401K: Distributions are reported on Form 1099-R. See instructions for reporting tax treatment.

Can withdraw penalty-free at age 59.5; must pay tax on distribution.

Early withdrawal penalty of 10% if under age 59.5; can avoid penalty if withdrawal is for first time home purchase, medical expenses, death / disability, educational, and more (see rules).

Required Minimum Distribution (RMD): Minimum amount a taxpayer must withdraw annually starting with the year they reach the age of 73 (2024) from their IRA or retirement account.

RMD is based on life expectancy factors by the IRS and taxed as ordinary income. Failure to withdraw RMD amount by the due date will be subject to excise tax.

Contributions made to Roth IRA are made with after-tax dollars.

Can withdraw contributions and earnings penalty-free at age 59.5; no tax on distribution. Withdrawals must be taken after the 5-year Roth IRA holding period.

Early withdrawal penalty and tax if under age 59.5; can avoid penalty if withdrawal is for first time home purchase, medical expenses, death / disability, educational and more (see rules)..

In the US, whether a child needs to file their own income tax return depends on the amount and type of income they earned.
Here's a breakdown of the thresholds for the 2024 tax year (filed in 2025):
- Earned Income: If the child's earned income (like wages, salaries, and tips) exceeds $14,600, they are required to file their own return.
- Unearned Income: If the child's unearned income (like interest and dividends) exceeds $1,300, they are also required to file.
- Combined Income: If the child has both earned and unearned income, they need to file if their total income is greater than the larger of these two amounts: $1,300 or their earned income plus $450.
Important Considerations:
- Even if your child doesn't meet these thresholds, they might still want to file a return if they had federal income tax withheld from their paychecks, as they may be eligible for a refund.
- Self-employment income: If a child has net earnings from self-employment of $400 or more, they must file a return and pay self-employment taxes, regardless of their total income.
- Kiddie Tax: If a child's unearned income exceeds certain thresholds ($2,600 for the 2024 tax year), it may be subject to the "kiddie tax," where some of their unearned income is taxed at the parent's tax rate.
- Reporting Unearned Income on Parent's Return: In some cases, parents can elect to report their child's unearned income (less than $13,000 for 2024, only interest and dividends) on their own tax return using Form 8814, according to the IRS. However, this might result in a higher tax burden for the parents depending on their income level.
- Claiming as a Dependent: Even if a child files their own tax return, their parents can still claim them as a dependent if they meet the dependency requirements, according to Kiplinger.
Roth IRA contribution limits
Here are the Roth IRA contribution limits for 2024 and 2025:
- 2024:
  - Under age 50: $7,000
  - Age 50 or older: $8,000 ($7,000 + $1,000 catch-up contribution)
- 2025:
  - Under age 50: $7,000
  - Age 50 or older: $8,000 ($7,000 + $1,000 catch-up contribution)
Note: These limits apply to the total contributions made to all of your traditional and Roth IRAs combined for the year. You cannot contribute more than your earned income for the year.
Income limitations
Eligibility to contribute to a Roth IRA, and the amount you can contribute, depends on your Modified Adjusted Gross Income (MAGI) and tax filing status.
- 2025 Roth IRA income and contribution limits:
Income thresholds for contributing to a Roth IRA in 2025 vary based on filing status and MAGI. For instance, single filers with a MAGI below $150,000 can contribute up to $7,000 ($8,000 if age 50 or older), while those with a MAGI of $165,000 or more cannot contribute directly. Married filing jointly or surviving spouses have different income ranges, with those earning less than $236,000 able to contribute the full amount and those earning $246,000 or more being ineligible for direct contributions. Married individuals filing separately who lived with their spouse during the year have stricter limits, with contributions reduced for those earning less than $10,000 and disallowed for those earning $10,000 or more.
If your income exceeds the direct contribution limits, strategies like a "backdoor Roth IRA" may be available. Overcontributing can lead to penalties, but withdrawing excess contributions and earnings before the tax filing deadline can help avoid them.

ROTH FIVE YEAR PERIOD

While the image lists a few (home purchase, education, etc.), the IRS actually allows several other "safe harbors" where you can take money out before age 59.5 without the 10% penalty:

Rule of 55: If you leave your job (laid off, quit, or retired) in or after the year you turn 55, you can take penalty-free withdrawals from that specific employer's 401(k).

Medical Expenses: Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).

Birth or Adoption: Up to $5,000 per parent, per child, within one year of the event.

Health Insurance: If you are unemployed and receiving unemployment compensation for at least 12 weeks.

Substantially Equal Periodic Payments (SEPP): A series of scheduled withdrawals based on your life expectancy (must continue for 5 years or until you turn 59.5).

SECURE 2.0 Additions (New for 2024–2026):

Emergency Expenses: One distribution per year up to $1,000 for personal/family emergencies.

Domestic Abuse: Victims can withdraw the lesser of $10,000 or 50% of the account.

The image notes you must wait 5 years for earnings to be tax-free. Here is how that "clock" actually works:

The Clock Starts Early: The 5-year period begins on January 1st of the year you made your first contribution to any Roth IRA.

It’s Not Per Account: Once you've had any Roth IRA for 5 years, the requirement is met for all your Roth IRAs.

Note on Conversions: If you "convert" a Traditional IRA to a Roth, each conversion has its own separate 5-year clock before you can withdraw the converted principal penalty-free (if under 59.5).

The image notes the age is 73. For anyone born between 1951 and 1959, the RMD age remains 73.

However, if you were born in 1960 or later, the age for Required Minimum Distributions will jump to 75 in the future.

IF YOU KEEP WORKING PASSED THE RETIREMENT AGE THERE ARE BENEFITS:

74-year-old person can contribute to an IRA, provided they have sufficient earned income and meet other eligibility requirements, such as income limits for a Roth IRA. The SECURE Act removed the age limit for contributing to a traditional IRA, allowing contributions at any age as long as there is taxable compensation.

Traditional and Roth IRAs

Traditional IRA: You can contribute as long as you have taxable compensation, such as from a job or self-employment. The IRS removed the age 70½ limit, so there is no maximum age for contributing.

Roth IRA: You can contribute at any age, as long as you have taxable compensation and your modified adjusted gross income is below the legal limits.

What you need to contribute

Earned income: You must have earned income to contribute to either type of IRA. The amount you can contribute is limited by your earned income for the year.

Age 50 or older catch-up contribution: For 2025, individuals age 50 or older can contribute an extra amount in addition to the standard limit. For 2025, the limit is $8,000 for those age 50 and over, which is a $1,000 catch-up contribution.

Income limits: Roth IRA contributions have income limits, and your ability to contribute can be reduced or eliminated if your income is too high.

Key difference between Traditional and Roth IRAs

Traditional IRA: Contributions may be tax-deductible, lowering your taxable income now. You will pay income tax on your withdrawals in retirement.

Roth IRA: Contributions are not tax-deductible, but qualified withdrawals in retirement are tax-free. This can be advantageous if you expect to be in a higher tax bracket in retirement.

EXCESS RETIREMENT CONTRIBUTIONS ARE NOT A PROBLEM!

you can apply an excess IRA contribution from one year toward the contribution limit of a subsequent year. This is one of the methods the IRS allows to correct an excess contribution.

How it Works

No "rollover" on Form 1040: You do not report the excess amount as a rollover or directly on Line 1 of Form 1040 for the subsequent year's contributions. Instead, the process is handled through specific forms and procedures to designate the prior year's excess amount as a current year contribution.

Paying the Penalty: The excess amount is subject to a 6% excise tax for every year it remains in the IRA at the end of the tax year.

Using the Excess: To use the excess in a later year, you simply contribute less than the maximum allowed for that later year by the amount of the excess.

Reporting:

You must report the 6% excise tax on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for each year the excess remains.

On the Form 5329 for the subsequent year, you report how much of the prior year's excess you are applying to the current year's limit.

Example

If in Year 1 you had an excess contribution of $1,000, and the contribution limit for Year 2 is $7,000, you could contribute only $6,000 in cash for Year 2 and apply the $1,000 excess from Year 1 to fill the remaining limit. You would pay the 6% penalty for Year 1, but not for Year 2 (assuming the excess is fully absorbed).

It is highly recommended to consult a tax advisor or IRS Publication 590-A and Form 5329 instructions for detailed guidance on how to properly report this on your tax forms.

. Qualified Birth or Adoption Distributions (QBAD)

The Rule: Penalty-free (no 10% tax) withdrawal for birth or adoption.

Limit: Up to $5,000 per parent, per child. (A couple can take $10k total for one child).

Timing: Must be taken within 1 year of birth/adoption date.

Taxation: Penalty is waived, but ordinary income tax still applies (on Traditional accounts/Roth earnings).

Repayment: Can be repaid within 3 years to replenish the account and recoup taxes paid.

Reporting: Must include child’s Name, Age, and SSN on the tax return. No proof of "spending" is required; the birth is the event.

II. Inherited Account RMDs

General Start: Usually begins the year following the owner’s death.

Unpaid RMDs: If the owner died before taking their RMD for that year, the beneficiary must ensure it is completed.

10-Year Rule: Most non-spouse beneficiaries must fully distribute the account by the end of the 10th year following the death.

Annual RMDs: If the original owner had already reached their RMD age, the beneficiary must typically take annual distributions during that 10-year window.

III. Social Security Lump-Sum Distributions

Combined Income Formula: AGI + \text{Tax-Exempt Interest} + \text{50% of SS Benefits}.

Taxability Thresholds: | Filing Status | 0% Taxable | Up to 50% Taxable | Up to 85% Taxable | | :--- | :--- | :--- | :--- | | Single/HOH | < $25,000 | $25k – $34k | > $34,000 | | MFJ | < $32,000 | $32k – $44k | > $44,000 | | MFS (living together) | N/A | N/A | 85% is taxable |

Lump-Sum Election Method:

Purpose: Prevents a large back-pay check from pushing you into a higher tax bracket.

How it works: You calculate tax as if the money was received in the years it was actually due.

Reporting: Reported on the current year return (Line 6b); do not file amended returns for prior years.

Withholding: Use Form W-4V if you want taxes taken out of monthly benefits to avoid a year-end bill.

Traditional IRA	Roth IRA
Tax on Contributions	Pre-tax (potentially deductible)	After-tax (no upfront deduction)
Tax on Growth	Tax-deferred	Tax-free
Tax on Withdrawals	Taxed as Ordinary Income	Tax-free (if qualified*)
Early Withdrawal	10% penalty + Tax on total	Contributions always penalty/tax-free
RMDs (Age 73+)	Required	None for original owner

II. 2026 Contribution & Deduction Limits
1. Universal Contribution Limits
2. Traditional IRA Deduction (Reducing AGI)
Filing Status

Full Deduction if MAGI is...	Partial Deduction (Phase-out)	No Deduction if MAGI is...
Single / HOH	< $81,000	$81k – $91,000	> $91,000
MFJ (You have plan)	< $129,000	$129k – $149,000	> $149,000
MFJ (Spouse has plan)	< $242,000	$242k – $252,000	> $252,000
MFS	N/A	$0 – $10,000	> $10,000

3. Roth IRA Contribution Eligibility

III. Tax Reporting: Form 1099-R

Quick Summary for Exams

Roth IRA income and contribution limits

The amount you can contribute to a Roth IRA depends on your filing status and your modified adjusted gross income (MAGI).

2024 Roth IRA income and contribution limits:

If your filing status is...	And your 2025 MAGI is...	Then you can contribute...
Married filing jointly or Qualifying surviving spouse	Less than $236,000	Up to the limit
	$236,000 to $245,999	A reduced amount
	$246,000 or more	Zero
Single, Head of household, or Married filing separately*	Less than $150,000	Up to the limit
	$150,000 to $164,999	A reduced amount
	$165,000 or more	Zero
Married filing separately (and you lived with your spouse at any time)	Less than $10,000	A reduced amount
	$10,000 or more	Zero

Note: For the 2025 tax year (for returns filed in 2026), these MAGI phase-out ranges have increased due to inflation adjustments. For example, the phase-out for Married Filing Jointly now begins at $236,000 and ends at $246,000.

*Qualified = 5-year holding period AND age 59.5, death, or disability.

The total combined limit for all your IRAs (Traditional + Roth) is:

Under Age 50: $7,500
Age 50 – 59: $8,600 (includes $1,100 catch-up)
Age 60 – 63: $11,350 (Higher "Super Catch-up" per SECURE 2.0)

Contributions are "Above-the-Line" deductions (they reduce your AGI). However, if you or your spouse are covered by a workplace retirement plan, the deduction "phases out" based on Modified AGI (MAGI):

Quick Summary of Changes (2024 vs. 2025)

Income Increase: The starting point for the phase-out for Single/Head of Household increased by $4,000 (from $146,000 to $150,000).
Married Joint Increase: The starting point for Married Filing Jointly increased by $6,000 (from $230,000 to $236,000).
Looking Ahead: The IRS has already announced that for the 2026 tax year, the contribution limit will increase to $7,500 ($8,600 for age 50+).

When your Modified Adjusted Gross Income (MAGI) falls within the "phase-out" range, the IRS requires you to use a specific formula to determine your maximum allowed contribution.

Here is the step-by-step process and the formula for the 2025 tax year.

The 2025 Phase-Out Formula

To find your reduced limit, you essentially calculate how far into the "danger zone" your income has traveled and subtract that proportional "penalty" from the maximum contribution.

Step 1: Calculate the "Excess Income"

Take your MAGI and subtract the Lower Limit of your filing status's phase-out range.

Single/Head of Household: Subtract $150,000.
Married Filing Jointly: Subtract $236,000.
Married Filing Separately (living together): Subtract $0.

Step 2: Calculate the "Reduction Fraction"

Divide your "Excess Income" by the total width of the phase-out range ($15,000 for Single/HoH; $10,000 for Married).

Step 3: Calculate the "Reduction Amount"

Multiply that fraction by your Full Contribution Limit ($7,000, or $8,000 if you are 50+).

Step 4: Determine Final Limit

Subtract the "Reduction Amount" from your Full Contribution Limit.

Example Calculation (2025)

Scenario: You are under 50, file as Single, and your 2025 MAGI is $156,000.

Excess Income: $156,000 - $150,000 = $6,000
Reduction Fraction: $6,000 \div $15,000 = 0.4 (or 40%)
Reduction Amount: 0.4 \times $7,000 = $2,800
Final Contribution Limit: $7,000 - $2,800 = $4,200

In this example, your maximum Roth IRA contribution for 2025 would be $4,200.

Important IRS Rounding Rules

Round Up: The IRS requires you to round the final result up to the nearest $10. (e.g., $4,205 becomes $4,210).
The "$200 Rule": If your calculated limit is more than $0 but less than $200, the IRS allows you to contribute a minimum of $200.

******

Note: If neither spouse has a workplace plan, the contribution is fully deductible regardless of income.

You cannot contribute to a Roth if your income is too high:

Single / HOH: Phase-out between $153,000 – $168,000.

MFJ: Phase-out between $242,000 – $252,000.

Issued for any distribution of $10 or more.

Traditional IRA: Box 2a shows the taxable amount (usually the whole distribution).

Roth IRA: Box 2a is usually $0 if it is a "qualified" distribution.

Conversions: Moving money from Traditional to Roth is reported on 1099-R and requires Form 8606 to track the tax-free basis and the taxable conversion amount.

Traditional: Tax break Now (Deduction), pay Later (Taxed on withdrawal).

Roth: Pay Now (No deduction), tax break Later (Tax-free withdrawal).

AGI Impact: Traditional IRA contributions are Above-the-Line (adjustments to income), while Roth contributions have zero impact on AGI.

IRAs and ROTH IRAs

Determine eligibility requirements for IRA contributions - To determine IRA contribution eligibility, you must have earned income (wages, salaries, or net self-employment income). For a Traditional IRA, you only need earned income, but deductibility may be limited by income if you have a workplace retirement plan. For a Roth IRA, your Modified Adjusted Gross Income must be below a certain threshold, which depends on your filing status and the contribution year. General requirements for both Traditional and Roth IRAs Earned Income: You must have earned income to contribute. The amount you can contribute is limited to the lesser of your earned income or the annual contribution limit ($7,000 for 2025 if under 50, or $8,000 if 50 or older).Spousal IRA: If you are married filing jointly, your working spouse can contribute to an IRA for you, provided they have enough earned income to cover both contributions.Age: There is no age limit for contributing to a Traditional or Roth IRA. Roth IRA specific requirements Income Limits: Eligibility is determined by your Modified Adjusted Gross Income (MAGI).Single filers: You can contribute the full amount if your MAGI is less than $150,000 (for 2025). A partial contribution is possible if your MAGI is between $150,000 and $165,000.Married filing jointly: You can contribute the full amount if your MAGI is less than $236,000 (for 2025). A partial contribution is possible if your MAGI is between $236,000 and $246,000.Other status: For those married filing separately, a partial contribution may be possible if MAGI is between $\$0$ and $\$10,000$. Traditional IRA specific requirements Income Limits: Unlike a Roth IRA, there are no income limits to contribute to a Traditional IRA, but there are income limits that can phase out your ability to deduct your contributions.Workplace retirement plan: If you or your spouse is covered by a retirement plan at work, your income level will determine how much of your contribution can be deducted.

ROLLOVERS

Explain IRA conversions, rollovers and contributions - A rollover moves funds from one retirement account to another, like from a 401(k) to an IRA, while a conversion specifically moves funds from a pre-tax account to a Roth IRA and is subject to taxes on the converted amount. An IRA contribution is adding new money to an IRA, either a traditional or a Roth, that has not been previously taxed and is subject to annual contribution limits. IRA contribution - What it is: Adding new money from an after-tax source (like a checking account) into an IRA. Source of funds: New money from your income, after taxes have been paid. Tax implications: Contributions to a traditional IRA are tax-deferred, and contributions to a Roth IRA are made with after-tax dollars. Annual limits: Subject to annual contribution limits set by the IRS. IRA rollover - What it is: Moving funds from one retirement plan to an IRA, typically from a previous employer's plan. Source of funds: Money from a qualified retirement plan, such as a 401(k). Tax implications: Generally tax-free and penalty-free, as the money has already been in a tax-advantaged account. It does not count toward your annual contribution limit. Annual limits: Does not count as an annual contribution. IRA conversion - What it is: Converting money from a pre-tax retirement account (like a traditional IRA or 401(k)) into a Roth IRA. Source of funds: Pre-tax dollars from a traditional IRA or 401(k). Tax implications: The amount converted is subject to income tax in the year of the conversion. Annual limits: Does not count as an annual contribution. It is a separate transaction.

The 4-Step Calculation Process

Step 1: Divide the Payment by Year

Look at your Form SSA-1099. It will usually have a breakdown or a letter attached showing exactly how much of that back pay was for 2023, 2024, and 2025.

Example: You received $15,000 in 2025, but $10,000 of it was actually for 2024.

Step 2: Refigure the "Earlier Year" (e.g., 2024)

You don't file an amended return. Instead, you use Worksheet 2 from IRS Publication 915 to do a "mock calculation":

Take your 2024 total income (wages, interest, etc.) from your already-filed 2024 return.
Add half of the back pay meant for 2024 to half of any Social Security you already received in 2024.
If this "New Combined Income" is below the 2024 threshold ($25k Single / $32k Joint), then $0 of that back pay is taxable.

Step 3: Figure the "Current Year" (2025)

Now, calculate your 2025 taxes without that $10,000 back pay.

Use only the portion of Social Security that was actually for 2025.
Follow the standard 2025 formula: $Combined\ Income = AGI + Tax\ Exempt\ Interest + 0.5 \times (2025\ SS\ Benefits)$ .

Step 4: The Final Addition

Your total taxable benefits for your 2025 return will be:

(Taxable portion for 2025) + (Any newly calculated taxable portion for 2024) - (Taxable benefits you already reported on your 2024 return).

2025 Thresholds for the Calculation

When re-calculating, use these "Base Amounts" to see if the money triggers a tax:

Filing Status	Base Amount (0% Taxable)	50% Taxable Range	85% Taxable Range
Single / HoH	Below $25,000	$25,000 – $34,000	Over $34,000
Married Joint	Below $32,000	$32,000 – $44,000	Over $44,000

IRAs and ROTH IRAs

How to report it on your 1040:

Line 6a: Enter the total Social Security received (including all back pay).
Line 6b: Enter the taxable portion you found using the election method.
Line 6c: Check the box labeled "Lump-sum election."

2024 Roth IRA income and contribution limits:

If your filing status is...	And your MAGI is...	Then you can contribute...
Married filing jointly or qualifying surviving spouse	Less than $230,000	Up to the limit
	$230,000 to $239,999	A reduced amount
	$240,000 or more	Zero
Single, head of household, or married filing separately (and you did not live with your spouse at any time during the year)	Less than $146,000	Up to the limit
	$146,000 to $160,999	A reduced amount
	$161,000 or more	Zero
Married filing separately (and you lived with your spouse at any time during the year)	Less than $10,000	A reduced amount
	$10,000 or more	Zero

*******

To calculate your exact 2025 reduced contribution, you can use the IRS "Worksheet" method. Since the income ranges for Single and Married are different widths ($15,000 vs. $10,000), the calculation changes slightly depending on your filing status.

Here is the step-by-step breakdown for the 2025 tax year:

The Formula

\text{Reduced Limit} = \text{Full Limit} - \left( \text{Full Limit} \times \frac{\text{MAGI} - \text{Lower Phase-out Limit}}{\text{Phase-out Range Width}} \right)

Step-by-Step Worksheet

Step	Instruction	Single / Head of Household	Married Filing Jointly
1	Enter your 2025 MAGI	$_________	$_________
2	Subtract the Lower Limit	– $150,000	– $236,000
3	Result (If 0 or less, you get the full limit)	= $_________	= $_________
4	Divide by the Range Width	÷ $15,000	÷ $10,000
5	Multiply by Full Limit ($7k / $8k)	× $_________	× $_________
6	Subtract from Full Limit	Final Max Contribution	Final Max Contribution

Example: Single (Under 50) with $156,000 MAGI

MAGI minus Lower Limit: $156,000 - $150,000 = $6,000
Divide by Range Width: $6,000 \div $15,000 = 0.4
Multiply by Full Limit: 0.4 \times $7,000 = $2,800 (This is your reduction)
Subtract from Full Limit: $7,000 - $2,800 = $4,200 * Your 2025 limit would be $4,200.

Important IRS Rounding Rules

The $10 Rule: If your result is not a multiple of $10, the IRS requires you to round up to the next $10 (e.g., $4,201 becomes $4,210).
The $200 Minimum: If your calculated limit is more than $0 but less than $200, you are allowed to contribute a flat $200.

2026 Look-Ahead

Since it is now 2026, keep in mind that the ranges have shifted again for the current year. If you are planning for this year's savings:

Single/HoH range: $153,000 – $168,000
Married Joint range: $242,000 – $252,000
Full Limit: $7,500 ($8,600 if 50+)

********

Does receiving Social Security disability income (SSDI) back pay make my benefits taxable?

If you receive a lump-sum back payment of SSDI benefits, it may be taxable if your total income for the year exceeds certain limits.

If that total is more than the following base amounts, some of your benefits may be taxable:

$25,000 for single, head of household, or qualifying surviving spouse filers

$32,000 for married couples filing jointly

$0 for married couples filing separately who lived together during the year

Wait, there’s a way to lower the tax bill!

You don't need to file amended returns for those prior years. You simply make the election on your current year's tax return (Form 1040 or 1040-SR).

2025 "Safe" Income Zones

If you choose the Lump-Sum Election, you only pay taxes on the portion of your back pay if your combined income for the year it was for exceeds these limits:

Single / Head of Household: $25,000

Married Filing Jointly: $32,000

Married Filing Separately (lived with spouse): $0 (almost always taxable)

What to look for on your Form SSA-1099

When you receive your 2025 Form SSA-1099 (usually in January 2026), look at the back or the "Description of Amount" section. It will specifically list:

The total amount paid in 2025.

A breakdown of how much was for 2024, 2023, etc.

Pro-Tip: Attorney Fees

If you had a lawyer help you get your SSDI and they took a fee from your back pay, you can often deduct a portion of that fee if your benefits are found to be taxable. This further reduces your tax bill.

QUESTION: is this statement regarding lump-sum back payments for Social Security benefits correct or not? Taxpayer is planning to retire early from their job in January 2024 and begin receiving SS at age 64. Taxpayer can take a lump sum of 6 months of SS upfront, and attribute a portion of the lump-sum to the prior tax year when the return is filed.

The SSA cannot pay 6 months of benefits in a lump sum - retroactive benefits are not allowed before full retirement age. BUT the taxpayer can attribute a part to the prior year - BUT only for income-tax calculation purposes under IRC section 86(e). an election under that section means you recompute taxable income as if a portion of the lump sum had been received in the earlier year BUT YOU DO NOT amend the prior tax return.

Social Security rules on retroactive retirement benefits

Reduced benefits (claiming before FRA).
• SSA “does not allow retroactivity for reduced retirement insurance benefits.” 7a
• Therefore, if you apply at 64 (which is below every FRA in effect), the earliest payable month is the month you file; no lump-sum for prior months.
Unreduced benefits (claiming at or after FRA).
• For applications filed after FRA, SSA may pay up to six months of retroactive benefits, but never for any month before FRA. 7b
• Popular press summaries convey the same rule: lump-sum retroactivity is available only “if you are past full-retirement age,” and it is capped at six months. 1c3b
Effect on the monthly check. Electing the lump-sum at or after FRA rolls your “benefit start date” back, erasing up to six months of delayed-retirement credits and permanently reducing the future monthly benefit. 2b6d

Implication for a 64-year-old: Because 64 is below FRA, the taxpayer cannot request a six-month retroactive payment at all.

2. Income-tax treatment if a lump-sum is ever received

Even though the 64-year-old cannot receive a lump-sum now, understanding the tax mechanics is useful if the taxpayer waits until FRA or later and then requests retroactivity.

Report in the year of receipt.
IRS guidance states that the entire lump-sum appears on that year’s Form SSA-1099 and must be included in gross Social Security benefits for the current tax year; you cannot amend prior-year returns. 26a

Optional § 86(e) “lump-sum election.”
• IRC § 86(e) lets you re-compute the taxable part of the lump-sum using each earlier year’s income so you are not pushed into a higher bracket merely because the benefits were paid late. 11a14a
• Publication 915 provides Worksheets 1–4 for this calculation and instructs you to check the box on Form 1040 line 6c to make the election. 20a25b
• Only the taxable portion (after the worksheet computations) is carried to Form 1040, line 6b; the earlier year’s return is left unchanged

3. Planning pointers for the taxpayer

Decide on timing first.
• Claiming at 64 gives immediate cash but locks in a permanent early-retirement reduction and no retroactive option.
• Waiting until at least FRA (currently 67 for those born 1960 or later) preserves the possibility of a six-month lump-sum—useful if cash is suddenly needed—but also reduces the delayed-retirement credits you would otherwise earn.
If you ever do receive a lump-sum:
• Keep your SSA-1099 with the break-out of benefits by year (box 3 on the form).
• Run the Publication 915 worksheets to see whether the § 86(e) election lowers your taxable benefits; if it does, check Form 1040 line 6c and keep the worksheets for your records.
Withholding or estimated tax.
• A large retroactive payment may increase provisional income enough to make up to 85 % of your benefits taxable. Consider requesting voluntary withholding on Form W-4V or adjusting estimated tax payments in the year you expect the lump-sum.

Bottom line

Because the taxpayer is only 64, the Social Security Administration will not grant the six-month retroactive lump-sum. The earliest benefit is the month of application. If the taxpayer later waits until after full-retirement age and does take a lump-sum, the entire amount is reported in the receipt year, but IRC § 86(e) allows a special election so that, for tax calculation purposes only, each earlier year’s share of the benefits is taxed as if received in that earlier year.

***********

SOCIAL SECURITY INCOME

Evaluate social security income situations based on filing states and personal information - Whether your Social Security benefits are taxed depends on your "combined income" and your tax filing status. Social Security is not taxed if: Social Security is your only source of income, you generally do not pay federal income taxes on your benefits. Your combined income is below the base threshold for your filing status. Social Security is taxed if:You have other sources of significant income in addition to Social Security benefits, such as wages, self-employment, pensions, interest, or dividends. Your "combined income" exceeds specific thresholds set by the IRS. Federal Income Tax Thresholds. To determine if your benefits are taxable, calculate your "combined income" (also known as provisional income), which is your Adjusted Gross Income (AGI) + nontaxable interest + one-half of your Social Security benefits. Based on your combined income and filing status, up to 50% or 85% of your benefits may be taxable at the federal level:

How much of my Social Security income is taxable?

The portion of your Social Security benefits that is subject to federal income tax depends on your "combined income". Combined income is calculated as:

Your Adjusted Gross Income + Nontaxable Interest + 1/2 of your Social Security benefits

If you file as...	And your combined income is...	Then...
Individual, head of household, or qualifying surviving spouse	$25,000 to $34,000	Up to 50% of your benefits may be taxable
	More than $34,000	Up to 85% of your benefits may be taxable
Married filing jointly	$32,000 to $44,000	Up to 50% of your benefits may be taxable
	More than $44,000	Up to 85% of your benefits may be taxable
Married filing separately	$0 or more	Up to 85% of your benefits may be taxable

QUESTION RE Taxable income versus exclusions

what is the AGI of a 65 year old single taxpayer if they earn 100000 in pension payments, 15000 in W2 income, 10000 in social security and 1000 in municipal bond interest?

Considerations for this 65 year old single filer:

Only $8,500 of the $10,000 Social Security is taxed - calculated as follows:

1. Modified adjusted gross income (MAGI) • Pension + W-2 = $100,000 + $15,000 = $115,000 • Add tax-exempt interest (muni bonds) = $1,000 • MAGI = $116,000

2. Provisional income (PI) - add one-half of the benefits: PI = $116,000 + ½ × $10,000 = $121,000

3. Compare PI with § 86 thresholds for a single filer (not indexed for inflation): • Base amount: $25,000 • Adjusted base amount: $34,000

PI exceeds the upper ($34,000) threshold, so the maximum 85 % inclusion rules apply.

Compute taxable amount (two-step cap under § 86(a)(2)) A. 85 % of benefits = 0.85 × $10,000 = $8,500 B.

Alternative cap: 85 % × (PI – $34,000) + smaller of $4,500 or 50 % of benefits = 0.85 × ($121,000 – $34,000) + $4,500 = 0.85 × $87,000 + $4,500 = $73,950 + $4,500 = $78,450 

The statute says use the lesser of A or B, so the taxable portion is $8,500 (which is exactly 85% of the benefit).

AGI is gross income minus the “above-the-line” deductions listed in § 62. No such deductions were provided, so:

$100,000 (pension)

* $15,000 (wages)

* $8,500 (taxable Social Security)

$0 (muni-bond interest excluded) = $123,500 Adjusted Gross Income

**********

What are the implications for Medicare premiums or coverage when electing to take a retroactive lump-sum Social Security payment?

Medicare consequences of taking a retroactive Social Security lump sum

Taking a retroactive lump-sum payment from Social Security can have unexpected consequences for your Medicare premiums.

Higher Monthly Premiums (IRMAA)

Medicare Part B and Part D premiums are income-based. If your modified adjusted gross income (MAGI) exceeds certain thresholds, you may be required to pay an Income-Related Monthly Adjustment Amount (IRMAA) surcharge in addition to your standard premiums.

Because a Social Security lump-sum payment is included in your MAGI for the year you receive it, it could push your income above these thresholds.

The Two-Year Look-Back

Medicare typically uses your tax return from two years prior to determine your current year's premiums. This means a lump-sum payment received in 2025 could result in higher Medicare premiums in 2027.

Medicare Part B and Part D Income-Related Monthly Adjustment Amounts (IRMAA) for 2025

If your 2023 MAGI was above the following amounts, you will pay an IRMAA surcharge in 2025:

If your 2023 filing status was...	And your 2023 MAGI was...
Single, Head of household, or Married filing separately (lived apart)	Above $106,000
Married filing jointly	Above $212,000
Married filing separately (lived together)	Above $106,000

Can you appeal an IRMAA surcharge?

Yes. If your income has decreased since 2023 due to a "life-changing event," you can ask the Social Security Administration to lower or eliminate the IRMAA surcharge. Common life-changing events include:

Retirement or reduced work hours
Death of a spouse
Marriage or divorce
Loss of income-producing property
Loss or reduction of pension income

To request a redetermination, you generally need to file Form SSA-44.

Important 2025 Update

For the 2025 tax year, the IRMAA thresholds have been adjusted for inflation. A lump-sum payment received in 2025 will be evaluated by Medicare in 2027 using the 2027 brackets.

How the Retroactive Election Changes Medicare Entitlement

Part A is automatic and retroactive. When you take up to six months of retroactive retirement benefits, Medicare Part A slides back the same number of months (no premium is due for Part A). 12b
Part B depends on your current status. • Already enrolled – SSA treats the back-dated months as months you “owed” premiums and simply withholds the balance from your lump-sum. 14a
• Not yet enrolled – The award letter offers an “early” and a “current” start date. Choosing the early date gives you coverage for those months but triggers a bill (lump-sum offset, full payment, or installments). 15b13c Declining keeps the lump-sum intact but leaves the gap in coverage.
If the arrearage is large (≥ 6 months) SSA can grant “equitable relief,” letting you pay over time or start Part B prospectively so you are not wiped out by premiums. 15a13a
Claim filing window extended. Providers have six additional calendar months after they get your notice to file Part A or Part B claims for services in the retroactive period. 15n

2. Effect on the Lump-Sum Cash and Ongoing Premiums

• Expect the deposit you receive to be smaller than the gross award because SSA first clears any outstanding Part B (and, if applicable, Part D) premiums. 14b
• Your regular monthly Part B premium resumes (or begins) in the month after the lump-sum; the amount is the standard premium plus any IRMAA tier you already occupy.

3. IRMAA: The Two-Year Echo

Year of receipt – The entire Social Security lump-sum appears on that year’s SSA-1099; you report it on your Form 1040.
Two years later – Medicare uses that tax return to set your IRMAA. A larger AGI may push you over an IRMAA “cliff,” raising Part B and Part D premiums for 12 months. 2a2d6b
Mitigation tools
• IRC § 86(e) election spreads the income over the years to which it really belongs, which can lower the taxable portion included in AGI.
• If the spike was truly one-time (and your income later falls), IRMAA will automatically drop in the following year, or you can request an IRMAA adjustment for a qualifying “life-changing event” such as work stoppage. 7e

4. Practical Planning Tips

Run the numbers first. Compare (a) keeping a bigger lump-sum today and starting Part B prospectively versus (b) paying premiums for retro coverage that may save you thousands in unpaid medical bills.
Keep SSA notices. You will need the award letter for providers and the SSA-1099 for the § 86(e) worksheets.
Budget for the IRMAA lag. A jump in 2025 income can raise 2027 premiums—set aside cash or plan Roth-conversions/withdrawals accordingly.
Installment option exists. If the lump-sum is insufficient to cover six or more months of premiums, ask immediately for an installment agreement (minimum $15/month, maximum 42 months). 13c

Bottom line: Electing a retroactive Social Security payment almost always back-dates (and back-bills) Medicare. You gain earlier Part A automatically and can elect earlier Part B, but the price is immediate recovery of any owed Part B premiums from your lump-sum and the possibility of higher IRMAA surcharges two years down the road. Plan for the cash-flow hit now and the premium ripple later before you say “yes” to the retro check.

QUESTION: Is this statement correct re lump-sum back payments for SS benefits? -

Social Security Disability Insurance (SSDI) is considered taxable income, but only if your total income exceeds specific IRS thresholds.

Whether you pay tax—and how much—depends on your "combined income" (also called provisional income). For the 2025 tax year (returns you are filing now in early 2026), the rules are as follows:

The "Combined Income" Formula

To see if you owe tax, the IRS uses this simple math:

$Combined\ Income = Adjusted\ Gross\ Income\ (AGI) + Tax\text{-}Exempt\ Interest + 50\%\ of\ your\ SSDI\ Benefits$

2025 Taxability Thresholds

Once you have your "Combined Income" number, compare it to the limits below to see what percentage of your benefits could be taxed:

Filing Status	Combined Income Range	% of SSDI Subject to Tax
Single, Head of Household, or Qualifying Widow(er)	Below $25,000	0% (Tax-Free)
	$25,000 – $34,000	Up to 50%
	Above $34,000	Up to 85%
Married Filing Jointly	Below $32,000	0% (Tax-Free)
	$32,000 – $44,000	Up to 50%
	Above $44,000	Up to 85%
Married Filing Separately (lived with spouse)	Any amount over $0	Up to 85%

Three Important Facts

SSI is Never Taxed: Unlike SSDI, Supplemental Security Income (SSI) is a needs-based program and is nevertaxable under federal law.
You’ll Never Pay Tax on 100%: Even if you are very wealthy, the IRS will never tax more than 85% of your SSDI benefits.
The "Lump-Sum Election": As we discussed earlier, if you received a large back-payment in 2025 that pushes you over these limits, you can use the Lump-Sum Election to apply that income to prior years, which often brings your 2025 tax bill back down to zero.

Is SSDI "Earned" or "Unearned" Income?

For tax purposes, SSDI is classified as unearned income (government benefits). This means:

You cannot use SSDI income to contribute to a Roth IRA (which requires "earned income" like wages).
It does not count toward qualifying for the Earned Income Tax Credit (EITC).

***********

ORM 1099R

Identify key elements of form 1099R and reporting of retirement distributions - Form 1099-R is the primary document for reporting retirement distributions. The key elements are the gross distribution amount, the taxable portion, any federal income tax withheld, and a specific distribution code. Key Elements of Form 1099-R - The form provides specific box numbers for important information: Box 1 (Gross Distribution): The total amount of money distributed during the year before any deductions or withholding. Box 2a (Taxable Amount): The portion of the gross distribution that is taxable as income. This amount may be the same as Box 1 or a smaller amount, depending on whether pre-tax or after-tax contributions were distributed. Box 2b (Taxable amount not determined / Total distribution): A checkmark in the "Taxable amount not determined" box indicates the payer does not have all the information to figure the exact taxable amount, and the recipient must figure it out themselves. A checkmark in the "Total distribution" box means the entire account balance was paid out. Box 4 (Federal Income Tax Withheld): The total amount of federal income tax that was withheld from the distribution. Box 5 (Employee Contributions/Insurance Premiums): Shows the employee's after-tax contributions (cost basis) to the plan, which are not taxable when returned to the recipient.Box 7 (Distribution Code(s)): A crucial code (or codes) that indicates the type of distribution (e.g., normal distribution, early distribution, direct rollover, disability) and helps determine if penalties apply. Payer and Recipient Information: Includes the name, address, and Taxpayer Identification Number (TIN) for both the institution making the distribution and the person receiving it. Other Ways Retirement Distributions Are Reported - Form 1099-R is the standard form for most retirement plan distributions. However, other forms may be used in specific, related situations: Form W-2 (Wage and Tax Statement): Distributions from certain nonqualified deferred compensation plans and eligible nongovernmental section 457(b) plans to plan participants are reported on Form W-2. Form 1099-NEC (Nonemployee Compensation): Distributions from certain nonqualified deferred compensation plans to nonemployees are reported on Form 1099-NEC. Form 1099-MISC (Miscellaneous Information): Distributions to beneficiaries of deceased plan participants from certain nonqualified plans are reported on Form 1099-MISC. Form RRB-1099-R: A variation of the form specifically for reporting distributions from the Railroad Retirement Board. Form 5498 (IRA Contribution Information): While not for reporting a taxable distribution itself, this form is sent to the IRA owner and the IRS to report contributions, rollovers, and the fair market value of the account. The information on Form 5498 helps track the basis in an IRA, which is needed to determine the taxable amount of future distributions. Form 4852 (Substitute for Form W-2 or 1099-R): Taxpayers use this form if they do not receive a correct or any Form 1099-R from their payer. Form 5329 (Additional Taxes on Qualified Plans): This form is used by the taxpayer to report and calculate any additional taxes on early distributions or for other violations, such as failure to take a Required Minimum Distribution (RMD).

Form 1099-SA Box 3 Distribution Codes

Code	Description
1	Normal distributions Use this code for normal distributions to the account holder and any direct payments to a medical service provider.
2	Excess contributions Use this code for distributions of excess HSA or Archer MSA contributions to the account holder.
3	Disability Use this code if you made the distribution after the account holder became disabled.
4	Death distribution other than code 6 Use this code for payments to a decedent’s estate in the year of death.
5	Prohibited transaction Use this code to report a prohibited transaction under section 4975.
6	Death distribution after year of death to a non-spouse beneficiary Use this code for payments to a non-spouse beneficiary after the year of the account holder's death.

Summary of 2025 Rules for Box 3

Normal Distributions (Code 1): These are tax-free as long as you use them for qualified medical expenses.
Excess Contributions (Code 2): If you contributed too much to your HSA in 2025, you must remove the excess (and any earnings) before the April tax deadline to avoid a 6% excise tax.
Prohibited Transactions (Code 5): This is a "red flag" code. If you see this, the IRS likely considers the entire account balance as taxable income, often plus a 20% penalty.

"loss on distribution" is not an option for box 3 on 1099-SA.

If you received a 1099-SA for 2025, you must file Form 8889 (Health Savings Accounts) with your Form 1040.

1. For Code 1 (Normal) or Code 3 (Disability):

Form 8889, Line 14a: Enter the "Gross Distribution" from Box 1 of your 1099-SA.
Form 8889, Line 15: Enter the amount you spent on qualified medical expenses.
- If Line 14a and Line 15 are the same, your taxes will be $0.
The Benefit of Code 3: If you are disabled (Code 3), you are exempt from the 20% penalty if you use the money for non-medical reasons, though you will still pay regular income tax on that amount.

2. For Code 2 (Excess):

You must report the earnings (from Box 2) as "Other Income" on Schedule 1 (Form 1040).
This ensures you aren't penalized for the over-contribution, provided you withdrew it before the April 15, 2026, deadline.

2025 HSA Contribution Limits (For Comparison)

To ensure you don't get a "Code 2" next year, here are the 2025 limits:

Self-Only Coverage: $4,300
Family Coverage: $8,550
Catch-up (Age 55+): Additional $1,000

Note: For the 2026 tax year, these will increase to $4,500 (Self) and $9,000 (Family).

***********

IRS DETAIL RE INCOME ON A RETURN

(includes self employed):

o WHO FILES. A U.S. citizen or permanent resident reports total worldwide income.
o EXCEPTIONS: Certain allowances, such as subsistence, uniform, and quarters allowances. Certain payments or services provided, as related to a spouse or dependent are generally excluded. A member of the U.S. Armed Forces who serves in a combat zone may exclude certain pay from income. Veterans' benefits are exempt too.

BASIS OF ACCOUNTING. Income can be recognized on accrual or on a cash basis. Once a method is adopted, IRS permission is usually required to change. A taxpayer can use a different method for each business. Remember constructive receipt means if you receive a check then its included in income on a cash basis whether or not you bank it. Or if your agent gets a check then its considered income too even if on a cash basis.

o EARNED INCOME VS UNEARNED INCOME:
§ EARNED and show on W2: Salaries, wages, tips, scholarships.
§ UNEARNED where no W2: Interest, dividends, capital gains, trust distributions, gifts, debt cancellation, pension, annuities, social security, royalties.
o KIDDIE TAX – NET UNEARNED INCOME of a dependent child is taxed at THE ESTATE TAX RATE (ordinary and capital gains tax rates applicable to estates and trusts).
§ Net unearned income is net of
§ $1,100 plus
§ The greater of $1,100 or the amount of allowable deductions incurred in the production of income.
WHAT IS CONSIDERED ‘WAGES’. Employee compensation includes advance commissions, back pay awards, excess of travel allowances over the cost of travel, non-refundable moving expenses, sick pay, short term disability pay, social security and Medicare TAX payments made by employer on behalf of employee, unemployment benefit payments received from unions, states, insurance companies, government, the market value of property received for services rendered, market value of fringe benefits, employer contributions on behalf of employee to a retirement plan, benefits under a cafeteria plan, payments for dependent care (up to $5,000 max), meals and lodging at work if a condition of employment, transportation cost payments over $65 per month, parking costs over $175 per month, up to $50,000 group term life insurance coverage.
PENSION PAYMENTS WHILST EMPLOYED. Taxability of pension contributions depends on whether made to a qualified pension plan or not. Employer contributions to a qualified retirement plan are not income to the employees when the contribution is made. Employee contributions, such as through payroll deduction, are included in income. Employer contributions to a non-qualified plan are included in income when the contribution is made.
TIPS. A taxpayer must report all tip income as wages. Tips include non-cash items. A daily record or other documentation is needed to prove the amount of tip income. Report tips to the employer by giving the employer a written statement of tips for each month by the 10th day of the next month. Reporting is required for each month the taxpayer receives tips of $20 or more while working for that employer. Withholding for income tax, Social Security tax, and Medicare tax is required for tips reported to the employer.
INTEREST INCOME. Report all interest income, whether reported on 1099-INT or not. Interest income is portfolio income and hence cannot be used to offset passive activity losses. Tax-exempt interest, e.g. interest earned on municipal bond investments must be shown on the return even though not subject to income tax. If a child is under age 14, has more than $1,400 of investment income and is required to file a return, and either parent is alive at the end of the year, part of that child's investment income may be taxed at the parent's tax rate. Can exclude any ‘frozen’ interest from income. Interest on a sell-financed mortgage loan is included in income of buyer(?). Certain distributions commonly called dividends are actually interest, e.g. payments from Cooperative banks, Credit unions, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Interest on U.S. obligations, such as U.S. Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States, is taxable for federal income tax purposes but is exempt from all state and local income tax. If bonds are co-owned, the interest is taxable to the individual whose funds were used to purchase the bond, even if the other co-owner receives the interest payments. If the taxpayer is receiving life insurance proceeds in installments, part of each payment is interest income.
DIVIDENDS AND OTHER CORPORATE DISTRIBUTIONS.
RENTAL INCOME AND EXPENSES.
OTHER MISCELLANEOUS INCOME

Alimony received

Retirement income

DISABILITY PAYMENTS. If retired and on disability, those payments are income. If the employee contributed to the cost of the plan, only the proceeds attributable to the employer's cost are included in income. If retired on disability, any lump sum payment received for accrued annual leave is a salary (i.e. 100% taxable), not a disability payment (which can be apportioned).
SOCIAL SECURITY (and retirement railroad benefits).

Property, real and personal

Tax Basis of property.
Sales or trades of property.
Gain or loss from sale of your home.

Reporting CAPITAL GAINS and losses

Self-employment tax
FICA – Social security and Medicare Tax
Net Investment Income Tax
Withholdings
FUTA

*******

IRS - ALL DEDUCTIONS AND CREDITS ON A PERSONAL RETURN (includes self employed):

ITEMIZED DEDUCTIONS:

IRA’s.
Moving expenses.
Alimony payments made.
Limits on itemized deductions and the standard deduction.
Miscellaneous deductions and the 2% rule.
Medical and dental expenses.
Employee educational expenses.
Employee business expenses, e.g., travel, transportation, etc.
Nonbusiness casualty and theft losses by individuals.
Business meals are 50% tax deductible if business is discussed at the meal. Business gifts are limited to $25.
Stock options.
Even non-US citizens who are resident in the US can have businesses and get itemized deductions. Included in itemized deductions in federal return are state and local taxes paid for the period.
Deduction for dependent expenses: Dependents are US citizens only. Dependent if provide more than 50% financial support for the person. Include stepparents and parents in law. To be claimed as a dependent, gross income of a non-child (i.e. parent living with you) must be less than $4,200 for 2019. Dependents are either by blood or immediate relatives e.g. spouse in marriage. Either can claim the relationship when filing a joint return. A dependent relationship established by marriage is not ended by divorce or even death. An individual must satisfy either the relationship or residency test, both are not necessary.
When is interest on a mortgage deductible? E.g., Upfront points charged by a lender on a mortgage can be deducted as considered interest. Under what circumstances?
Charitable contributions. Changed for 2020.
Interest expense. Generally, not deductible by individuals.
Deductible tax payments.
Qualifying Business Income

QBID table
QBI Loss carryovers.

AMT:

Adjustment for deductions over and above the AMT limit (can be itemized deductions or standard deduction). Also in the adjustment is balance of research and experimental expenditures. Charitable contributions are not included as an adjustment item.
AMT adjustments.
Minimum Tax Credit (MTC).

CREDITS:

Education Credits are AOC, Hope Credit and Lifetime learning credit. American Opportunity Credit (AOC) - normally claimed in first three years of college – cannot claim if claiming the lifetime learning credit. Lifetime learning credit – cannot claim if claiming the AOC. This is normally claimed after the AOC in e.g. 4^th and 5th years of college (or later). Phases out for singles $58k-$68k AGI.
Child Tax Credit (And credit for other dependents).
Child and Dependent CARE credit.
Adoption Credit.
Additional Child Tax Credit.
Credit for elderly and disabled.

Decision tree.

Premium Tax Credit.
Foreign tax credit.
Work opportunity tax credit.
Research Credit.
Refundable Credits.
Earned Income Credit: Table below shows income limits below which EIC can be claimed:

Table below shows examples of includable and excludable income for EIC purposes:

LOSSES:

Casualty and theft losses
Disaster Areas
Capital Losses
Net Operating Losses
AT-RISK RULES
Passive Activity Loss (PAL) Rules

PAL Limitation

*******