Confused about Social Security tax withholding with dividend income - need to withhold separately?

The $600 likely represents your total federal tax liability based on all income sources you entered into the calculator. Tax calculations consider your combined income (which includes 50-85% of SS benefits + other income sources like dividends). If you want to be certain, could you share the specific calculator you used? Some are more clear than others about what's included in the final number.

I had EXACTLY the same problem last year trying to figure this out!!! SO FRUSTRATING. The SSA website is TERRIBLE at explaining this stuff clearly. I ended up having to pay penalties because I didn't withhold enough. The SSA people on the phone couldn't even explain it properly when I called!!!

i think it depends on which calculator you used. some of them add everything together and others just do the ss part. my sister had this problem too

To clarify this situation: The $600 tax liability shown on most calculators represents your TOTAL federal tax liability based on your combined income from all sources you entered. Here's how it works: 1. Your "combined income" for determining Social Security taxation = your AGI + nontaxable interest + 50% of your SS benefits 2. If your combined income is between $25,000-$34,000 (single) or $32,000-$44,000 (married filing jointly), up to 50% of benefits may be taxable 3. Above $34,000 (single) or $44,000 (married), up to 85% of benefits may be taxable The calculator should be considering your dividend income + the taxable portion of your Social Security when it gives you that $600 figure. You don't need to add anything more for the dividends. For withholding, use Form W-4V to request voluntary withholding from Social Security at 7%, 10%, 12%, or 22%. Choose the rate that will cover your total tax liability.

my neighbor had this same question last month! she just retired too. i think she ended up having her financial advisor figure it out for her.

I've been dealing with this exact issue for three years now. The easiest solution I've found is using the IRS Tax Withholding Estimator (https://www.irs.gov/individuals/tax-withholding-estimator) - it's much clearer than most calculators and specifically tells you if the number includes all your income sources. But to answer your question directly: if you entered both your SS benefits and your dividend income into the calculator, then the $600 should be your TOTAL tax liability. Here's what I recommend: 1. Use Form W-4V to have Social Security withhold taxes (you can choose 7%, 10%, 12%, or 22%) 2. Calculate what percentage of your annual benefits $600 represents 3. Choose the withholding percentage closest to what you need If your SS benefits are too small for the withholding to cover all your tax liability, you might need to make quarterly estimated payments for the remainder using Form 1040-ES.

Have you tried calling the SSA? I spent 3 hours trying to get through to them last month about a similar question and never got past the hold music. Then I found this service called Claimyr (claimyr.com) that got me connected to an actual SSA agent in about 20 minutes. They have a video showing how it works here: https://youtu.be/Z-BRbJw3puU The agent was able to explain the tax withholding options clearly and helped me fill out the W-4V form correctly right over the phone. Saved me a ton of frustration!

One additional clarification: If your tax liability is only $600 for the year, you might consider whether withholding is even necessary. The IRS generally doesn't require you to make estimated tax payments if: 1. You expect to owe less than $1,000 in tax after subtracting withholdings and credits, OR 2. Your withholding and credits will cover at least 90% of your current year's tax liability or 100% of last year's tax liability (whichever is smaller) With only $600 in expected tax, you might not need to have Social Security withhold anything if you're comfortable paying the full amount when you file next April.

dont forget state taxes too if ur state taxes social security

After reading through this thread, I just want to emphasize one thing: most online calculators are indeed calculating your TOTAL tax liability when they give you that final number (assuming you entered all income sources correctly). What confuses many people is that the calculator might break down how much of your Social Security is taxable (the 5% you mentioned), but the final tax number ($600) typically represents what you'll owe based on ALL your taxable income combined. I'd suggest double-checking by using the IRS's own calculator. If that also shows around $600, you can be confident that's your total federal tax liability for the year.

Just wanted to add my experience from last year - I had almost the exact same situation with SS benefits and dividend income. The key thing that helped me was understanding that when you input both income sources into a tax calculator, the final number IS your total tax liability. What I did was use the IRS Tax Withholding Estimator (as Javier mentioned) and then cross-checked it with TurboTax's estimator. Both gave me similar results, which gave me confidence in the number. For the withholding part, I ended up going with the 7% option on Form W-4V since my tax liability was relatively small compared to my annual SS benefits. It's worked out perfectly - no surprises at tax time and no penalties. One tip: keep records of which calculator you used and what inputs you entered, so you can reference it later or use it to double-check if your situation changes mid-year.

I went through this exact same confusion when I first retired! The biggest thing that helped me was realizing that most reputable tax calculators (like the IRS one, TurboTax, etc.) do calculate your TOTAL tax liability when you input all your income sources. Here's what I learned the hard way: if you entered both your Social Security benefits AND your dividend income into the calculator, that $600 is almost certainly your complete federal tax liability for the year. The calculator is doing all the complex math behind the scenes - figuring out what portion of your SS is taxable, adding your dividend income, applying standard deductions, etc. My suggestion would be to run your numbers through 2-3 different calculators (definitely include the IRS Tax Withholding Estimator) and see if they all give you similar results. If they're all in the $600 range, you can feel confident that's your total tax bill. For withholding, the 7% option on Form W-4V should easily cover a $600 annual tax liability depending on your monthly benefit amount. Much better to have a small refund than an unexpected bill!