Social Security retirement benefits vs. SSI - confused about deductions and possible tax surprises

There's an important distinction here. You mentioned "SSI" in your title but then describe retirement benefits in your post. Those are two completely different programs! SSI is Supplemental Security Income (needs-based), while it sounds like you're actually receiving regular Social Security retirement benefits based on your work history. Regarding deductions: Social Security doesn't automatically withhold federal taxes unless you specifically request it. "Before deductions" typically refers to potential Medicare premiums (if you're enrolled), voluntary tax withholding (which you'd need to request using form W-4V), or any garnishments for things like unpaid federal debts. If you're concerned about taxes, you should complete form W-4V to request voluntary withholding. You can choose to have 7%, 10%, 12% or 22% withheld.

I went thru the same thing last year! They don't take out ANY taxes automatically and I got hit with a BIG bill at tax time. My accountant was mad at me for not setting up withholding sooner lol. You need to fill out a form to make them take taxes out.

When Social Security says "before deductions," they're typically referring to several possible deductions: 1. Medicare premiums (Part B is currently $174.70/month for most people in 2023, possibly more depending on your income) 2. Voluntary tax withholding (not automatic - you must request it) 3. Any garnishments for things like child support, alimony, or federal debts 4. Medicare Advantage or Part D premiums if you've elected to have them deducted Since you're just starting benefits, Medicare enrollment might not be synchronized yet, which could explain why you're seeing the full amount. If you're already on Medicare, the premiums should start coming out soon, possibly next month. For tax withholding, you'll need to submit Form W-4V to request voluntary federal tax withholding. You can choose 7%, 10%, 12%, or 22%. Download it at irs.gov or call Social Security to request one. Up to 85% of your Social Security benefits may be taxable depending on your combined income. Many retirees are surprised by this.

I HATE how confusing the whole Social Security system is!! When I started getting my benefits last year they did the same thing - told me "before deductions" then gave me the full amount. Then THREE MONTHS LATER suddenly they took out Medicare premiums without warning and my payment dropped!!! Called and waited on hold for 2.5 HOURS and they said "oh yeah it takes time for the systems to sync up" 🙄 WHY DON'T THEY TELL US THIS STUFF UP FRONT?? The whole system is designed to confuse seniors!

I was having the same problem trying to reach someone at Social Security to set up tax withholding. After getting disconnected four times and waiting on hold for hours, I tried Claimyr and it worked great. They connected me to a real person at SSA in about 20 minutes. You can see how it works in their video demo here: https://youtu.be/Z-BRbJw3puU. The agent helped me set up my withholding right away. Their website is claimyr.com if you want to check it out.

my uncle got hit with a $5k tax bill cuz nobody told him ss was taxable lol

To directly answer your question: you should absolutely set up voluntary withholding if you're concerned about a tax bill. The W-4V form is available on the IRS website (irs.gov), or Social Security can mail you one. A few key points about Social Security taxation that many new beneficiaries don't realize: 1. Whether your benefits are taxable depends on your "combined income" (AGI + non-taxable interest + half your SS benefits) 2. For individual filers: - Below $25,000: No tax on SS benefits - $25,000-$34,000: Up to 50% of benefits may be taxable - Above $34,000: Up to 85% of benefits may be taxable 3. For married filing jointly: - Below $32,000: No tax on SS benefits - $32,000-$44,000: Up to 50% of benefits may be taxable - Above $44,000: Up to 85% of benefits may be taxable Many retirees find 10% withholding works well, but consult with a tax professional based on your specific situation.

Thank you all so much for the helpful information! I just downloaded the W-4V form and will send it in tomorrow. I'm thinking I'll start with 10% withholding and adjust next year if needed. I'll also check with my tax preparer to see if I should make any quarterly estimated tax payments for this year since I've already received a few months of benefits without withholding. It's frustrating that the SSA representative didn't explain any of this when I applied for benefits. When they say "before deductions" they should really clarify what that means! I suspect I'm not the only newly retired person confused by this.