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Q&A: Does Every Average Person Have to Pay Social Security Tax and File an Income Tax Return?

Social Security Tax

Question and background:

Does every average person have to pay Social Security taxes and file an income tax return? I know someone who is in their seventies and has not paid Social Security tax since retired or filed a tax return. They have no other income. Is it mandatory that they file, and would they have to do that now?

Answer:

FICA taxes (Social Security and Medicare) are paid by those who are currently earning an income from working—employees, employers, and the self-employed. FICA taxes are not paid on passive earnings such as interest, dividends, and capital gains, nor are they paid on pension or Social Security income.

For 2015, folks must file an income tax return if their “gross income” is at least:

• $10,300 - Single
• $11,850 - Single, age 65 or older
• $13,250 - Head of Household (with one dependent), under 65
• $20,600 - Married Filing Jointly
• $23,100 - Married Filing Jointly, both age 65+
• $400 - Net self-employment income, any age or filing status

Note that the amount of Social Security that is taxable is based on a concept called “provisional income” and it differs from the standard income tax brackets. So if you receive Social Security benefits, not all (and possibly even none at the lower levels) will be included in the tax filing thresholds above.