Guideline for providing income for a retired Senior citizen for Credit Card app

[SouthJamaica]

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@SoCalGardener wrote:

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@Save-n-Invest wrote:

Social Security benefits are taxable at certain modest income levels. The last time they *saved* Social Security in 1983 that tax was established. The fun thing is that income thresholds established in 1983 have not been indexed for inflation. A new (higher) threshold was added years later. Still no indexing. 

https://www.ssa.gov/benefits/retirement/planner/taxes.html

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I guess I've been very lucky. My attorneys told me at the time my SSDI claim was approved that I would not be required to pay income tax going forward. And that's been true all along, even after it changed to regular SS. Because my other income is from an annuity that was funded with post-tax money, I'm not taxed when I make withdrawals. And its interest, while very good, doesn't put me over the threshhold for paying income tax.

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1.  Having to pay income tax and having to file annual tax returns are not the same thing.

2.  Many people who do not have to file returns do in fact file returns, for a multiplicity of reasons.

3.  We do not know what OP's mother's situation is, but if she doesn't file tax returns, she should look at a tax return form and see what she would be reporting as income if she were.

[SoCalGardener]

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@SouthJamaica wrote:

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@SoCalGardener wrote:

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@Save-n-Invest wrote:

Social Security benefits are taxable at certain modest income levels. The last time they *saved* Social Security in 1983 that tax was established. The fun thing is that income thresholds established in 1983 have not been indexed for inflation. A new (higher) threshold was added years later. Still no indexing. 

https://www.ssa.gov/benefits/retirement/planner/taxes.html

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I guess I've been very lucky. My attorneys told me at the time my SSDI claim was approved that I would not be required to pay income tax going forward. And that's been true all along, even after it changed to regular SS. Because my other income is from an annuity that was funded with post-tax money, I'm not taxed when I make withdrawals. And its interest, while very good, doesn't put me over the threshhold for paying income tax.

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1.  Having to pay income tax and having to file annual tax returns are not the same thing.

2.  Many people who do not have to file returns do in fact file returns, for a multiplicity of reasons.

3.  We do not know what OP's mother's situation is, but if she doesn't file tax returns, she should look at a tax return form and see what she would be reporting as income if she were.

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Yes, absolutely! As I said originally, MANY retired people--including me--are not required to file income tax returns, while SOME do file.

Having to file and wanting to file are a moot point for me, as there's absolutely nothing to be gained by filing.

As for using an income tax return to determine what income the mother should report, based on what I read yesterday (via links in this thread) lead me to believe that that would be incorrect. Something about taking HALF of your SS income and coming up with your AGI. That would be bad in terms of seeking a credit card. In my opinion, and experience, the best practice is to use my ACTUAL income as the income reported to CC companies. It's worked out very well for me!

[SUPERSQUID]

In my case i file yearly federal tax returns but always owe zero and get a small amount back. my state doesnt tax ss so i am not required to file state taxes. i leave these decisions up to my cpa who used to work for the IRS.

If i were asked for proof of income it would be easy because i would simply give them the previous years tax document from ss plus my percentage of cola for the upcoming year.

[Save-n-Invest]

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@SoCalGardener wrote:

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@SouthJamaica wrote:

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@SoCalGardener wrote:

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@Save-n-Invest wrote:

Social Security benefits are taxable at certain modest income levels. The last time they *saved* Social Security in 1983 that tax was established. The fun thing is that income thresholds established in 1983 have not been indexed for inflation. A new (higher) threshold was added years later. Still no indexing. 

https://www.ssa.gov/benefits/retirement/planner/taxes.html

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I guess I've been very lucky. My attorneys told me at the time my SSDI claim was approved that I would not be required to pay income tax going forward. And that's been true all along, even after it changed to regular SS. Because my other income is from an annuity that was funded with post-tax money, I'm not taxed when I make withdrawals. And its interest, while very good, doesn't put me over the threshhold for paying income tax.

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1.  Having to pay income tax and having to file annual tax returns are not the same thing.

2.  Many people who do not have to file returns do in fact file returns, for a multiplicity of reasons.

3.  We do not know what OP's mother's situation is, but if she doesn't file tax returns, she should look at a tax return form and see what she would be reporting as income if she were.

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Yes, absolutely! As I said originally, MANY retired people--including me--are not required to file income tax returns, while SOME do file.

Having to file and wanting to file are a moot point for me, as there's absolutely nothing to be gained by filing.

As for using an income tax return to determine what income the mother should report, based on what I read yesterday (via links in this thread) lead me to believe that that would be incorrect. Something about taking HALF of your SS income and coming up with your AGI. That would be bad in terms of seeking a credit card. In my opinion, and experience, the best practice is to use my ACTUAL income as the income reported to CC companies. It's worked out very well for me!

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Response

That can also be bad for your mental health. There is a worksheet type form on the benefit notice received each year. It's a convoluted exercise that only the government could design. The same weirdness is also available at irs.gov.

I use this to get an idea of what portion of my benefts will be taxable.

https://www.fool.com/retirement/social-security-how-much-benefits-taxed.aspx

Not recommending it for cc applications as I seldom apply for credit. The only time I was asked for taxable amount of SS was by Amex regarding a long time existing account always paid in full. Naturally, the geniuses at Amex make this ask in February when all data is i the CPAs office. Gotta love 'em.

[SoCalGardener]

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@Save-n-Invest wrote:That can also be bad for your mental health. There is a worksheet type form on the benefit notice received each year. It's a convoluted exercise that only the government could design. The same weirdness is also available at irs.gov.

I use this to get an idea of what portion of my benefts will be taxable.

https://www.fool.com/retirement/social-security-how-much-benefits-taxed.aspx

Not recommending it for cc applications as I seldom apply for credit. The only time I was asked for taxable amount of SS was by Amex regarding a long time existing account always paid in full. Naturally, the geniuses at Amex make this ask in February when all data is i the CPAs office. Gotta love 'em.

You know what I did? And do a few times a decade? There's an IRS chart that shows how much taxable income you have to make in order to be required to file. I verify that I don't meet the threshhold....and then I'm done for a few more years. If I ever found out that I should've been paying....at some point along the way....it couldn't possibly be a big deal, so I'd just pay it and be done with it. I used to use a CPA for all this, but no longer needed one after going on SSDI.

[Save-n-Invest]

@SoCalGardener  I still use the CPA. I'm probably turbotax material but I just don't want to do that. The CPA has been doing my taxes since forever. He tells me he just inputs my data into his computer for the filings. I like that he is the person authorized to contact if a taxing authority has concerns. I don't want to go to the slammer in my dotage. 

The new tax law passed in December 2017 really did a number on me. CPA tried to talk me off the ledge but I refuse. I am required to comply. Affection for the the law is optional.

[SoCalGardener]

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@Save-n-Invest wrote:

@SoCalGardener  I still use the CPA. I'm probably turbotax material but I just don't want to do that. The CPA has been doing my taxes since forever. He tells me he just inputs my data into his computer for the filings. I like that he is the person authorized to contact if a taxing authority has concerns. I don't want to go to the slammer in my dotage. 

The new tax law passed in December 2017 really did a number on me. CPA tried to talk me off the ledge but I refuse. I am required to comply. Affection for the the law is optional.

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My circumstances have changed SO DRAMATICALLY since before becoming disabled, there's no comparison. Everything has changed--from having a high-paying job to paying a mortgage to filing long 1040 forms and claiming everything....it's the polar opposite now. There's just no benefit in it for me, and since I'm not obligated to file, I don't. Even though I've had OUTRAGEOUS medical bills, filing taxes and itemizing those wouldn't give me any money! Medical expenses are just used to LOWER what you owe....they don't pay you back for outrageous bills. I wish it worked that way! Anyway, with no mortgage (and therefore no mortgage interest--if claiming that is still a thing), no work-related income, and interest income that doesn't come close to the threshhold, there's just no point.

[Save-n-Invest]

@SoCalGardener if you don't need to file. You don't need to file. Makes sense to me. You know what your are doing.

The new law is a real beaut. The deductible items are out of pocket health care exceeding 7.5% of AGI. State and local taxes capped at 10k. You can claim real estate taxes and either sales tax *or* income tax, not both. Capped at 10K total.

Charitable contributions in full, I think. A few items were grandfathered such as the changes to taxation/deductibility of alimony payments. They even gave an extra year's grace for the old coots to trade up to the current model year. 

Oh, personal exemption is gone, too. It's not been that long since people age 65+ and blind got two personal exemptions. Now it's jack!

SALT cap is the real kicker for me. I want to walk the line so I'm stopping here. 

[NYC_Fella]

Getting back to the original question, I'm retired and my "income" is whatever I want it to be since I have significant balances in retirement savings, most of which have alredy been taxed, so none of my withdrawals show up on my income tax returns. When I need money, I take some out. The amount varies wildly from year to year. Rather than try to explain all this, I just select "Retired" for occupation and $120K for income which is high enough to get most cards approved and low enough not to trigger a 4506 request. Haven't had a problem yet.

[Save-n-Invest]

@NYC_Fella many of us are in the same position as you are. Income is what is needed at the time. Some issuers consider investable assets as well as income. Chosing retired and then responding to any foolw up questions is one way to go.