Planner - how it handles taxing of Social Security Benefits

Mark Nelson

You planning screen only shows tax info based on IRS form 1040. Seniors over 65 use form 10040SR which calculates taxable income substantially differently. What is the possibility that you have a choice of which tax form to use for planning?

Sherlock

The differences between the IRS form 1040SR and 1040 are cosmetic.  Taxable income is not calculated substantially differently.

volvogirl

They are the same.  The 1040SR is just bigger type and is on  3 pages.  

1040 https://www.irs.gov/pub/irs-pdf/f1040.pdf 

1040SR https://www.irs.gov/pub/irs-pdf/f1040s.pdf 

They use the same Instructions https://www.irs.gov/pub/irs-pdf/i1040gi.pdf 

volvogirl

And you can use whichever one you want.  If you are using the Turbo Tax Desktop program you can select which one to print.  Turbo Tax online automatically gives you the 1040SR if you are 65 or older.  

Ps56k2

Mark Nelson said:  Seniors over 65 use form 10040SR which calculates taxable income substantially differently.

Yikes - I hope not ..... Nope, just BIGGER text and formatted a little different.

Mark Nelson

You are correct that they are same form. The problem is with your planning section that shows total income. Social Security is taxed at 50% or less and your doesn't reflect that. In my case my taxable amount is way less than 50%. Refer to the Social Security Benefits Worksheet--Line 6a and 6b. Perhaps you could make some changes to reflect that. I suspect you are all under 65 and not collecting social security, or you would know this.

volvogirl

Nope, most of us here are retired so over 65.   And it's not 50% but up to 85%!

Up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

Ps56k2

Mark Nelson said:  The problem is with your planning section that shows total income. Social Security is taxed at 50% or less and your doesn't reflect that. Refer to the Social Security Benefits Worksheet--Line 6a and 6b.

So, the REAL question and topic is -

how the Quicken Planner handles Social Security as part of Income and how taxed ?
The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:

• up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual
  or $32,000 to $44,000 for a married couple filing jointly.
• up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).
  

Ps56k2

EDIT - updated topic title to better reflect the actual Q&A

Chris_QPW

Mark Nelson said:

The problem is with your planning section that shows total income. 

And your problem is assuming that we are Quicken Inc employees, so this isn't "our planning section".

I personally haven't dug deeply into how the Lifetime Planner deals with the taxes, but in general I expect it to be wrong.

As @volvogirl points out the taxing of Social Security is dependent on your income for any given year and married status and such.  I doubt that the Quicken Lifetime Planner does any of that.  And if it did, I would expect it to be out of date.  They haven't even updated it for the change in RMD from 70 1/2 to 72 yet.

My off the wall guess is that it taxing the amount using the "After-retirement tax rate" and it is up to the user to set that to the "right amount" (which of course could be wrong depending on what year one is talking about).

Mark Nelson

So how do we get Quicken to correct their app?

Ps56k2

Mark Nelson said: You planning screen only shows tax info based on IRS form 1040.

just to clarify - which Menu and screens are you looking at -

- Lifetime Planner
- Tax Center
- Tax Planner

Sherlock

Mark Nelson said:

So how do we get Quicken to correct their app?

To report a problem to Quicken, select Help > Report a problem...