The folks here are correct, this is a question for a bonafide CPA which is different from a "tax preparer" or "enrolled agent"...although there are some pretty sharp people who carry those titles also. I am a CPA in private practice and a substantial part of my client base are retired individuals. I will tell you what I can about the TAX effects of earning additional money when on social security. I'll leave the issue of reduced benefits due to non-SS income to others. The thing that I hammer into the heads of all my clients who are approaching retirement is that they should never touch a dime of SS without picking up the phone and calling me first. My promise to them is that there will be no charge for evaluating their circumstances and making sure they are protected. I make my money doing the tax return and happily consult on the phone with regular clients.
The way that outside income affects social security for tax purposes is by making up to 85% of the social security taxable. There is a formula that is used. Without making this response too lengthy and complex, you start with adjusted gross income (AGI). There are certain things which are added to get a modified AGI...etc, etc.
To make it simpler for you, if your household income is in the low $30K and up range you should call around and find a CPA who will talk to you on the phone, quote you a price range up front and who you feel comfortable with. Make an appointment to get it evaluated properly. He will set you up with tax withholding on pensions and social security which will keep the taxes paid and allow you to enjoy your retirement without worries about quarterly tax payments, penalties and interest. That is his job. He worked hard to get there and deserves to be paid a reasonable fee for his services. Find the right guy and you will be a happy retiree.
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Today's Featured Article - A Lifetime of Farm Machinery - by Joe Michaels. I am a mechanical engineer by profession, specializing in powerplant work. I worked as a machinist and engine erector, with time spent overseas. I have always had a love for machinery, and an appreciation for farming and farm machinery. I was born and raised in Brooklyn, New York. Not a place one would associate with farms or farm machinery. I credit my parents for instilling a lot of good values, a respect for learning, a knowledge of various skills and a little knowledge of farming in me, amo
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