RE: W2Gs - was [vpFREE] DIAD (long and probably too much info for most)

Social security is handled a little differently for self-employed vs. employees, but the end result is the same. The employer's portion is not taxed as it is not defined as "income" for tax purposes, but the employee's portion is subject to tax. Self-employed individuals can deduct half of the social security component of their "self employment tax" (which is nothing more than total social security and Medicare payments that would have been made on the earned income had the self-employed person been an employee) from income for tax purposes. Either way, the individual is paying taxes on only his half of the contribution. Actually with the "holiday", the employee's contribution of income is 2% less so the numbers are currently skewed a little in favor of the individual. It's not double-taxation because only (up to) one-half of your social security income can be taxed. In other words, the half of your premiums that wasn't taxed (the employer's contribution) can be taxed upon receipt of your social security income. The inability to deduct payments was in the original legislation in the '30's. I believe the taxation of the annuity payments was a product of the massive tax code changes under Reagan in the 80's. It's not my intent to engage in some philosophical debate about whether taxing half of that income is right or wrong, only reporting data.To: vpFREE@yahoogroups.com
From: viajo1964@gmail.com
Date: Mon, 20 Feb 2012 16:03:34 -0600
Subject: RE: W2Gs - was [vpFREE] DIAD (long and probably too much info for most)






I usually don't get in discussions like this as y'all know more than me….but on this I will as SS is taken out PRE TAX not after taxes….the first part of it being taxed over a certain amount is correct….I don't see how you get double taxation out of it.

Lisa

Your social security, for one, will be taxed and/or reduced if your household income exceeds a certain amount, last I heard it was around 34K a year, when in fact that social security money was already taxed when you paid it in while working. Double taxation doesn't seem all too fair to me.

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