A. Some states tax Social Security benefits, others don't. California, for instance, keeps hands off, while Connecticut taxes the same portion of your benefits as are subject to federal taxes. For information on your state, check with your state tax agency.
The Social Security Administration does not withhold federal taxes from your benefit payments unless you request it. To do so, complete IRS Form W-4V (pdf), which is available on the IRS website, or by calling Social Security at 1-800-772-1213.
When you fill out the form, you'll be asked to choose among four withholding levels: 7, 10, 15 or 25 percent. See "Withholding federal taxes from my Social Security check."
Q. I recently began my Social Security retirement benefits at age 66 — my full retirement age. If I continue to work, do I still have to pay Social Security and Medicare taxes?
A. Yes, you do. In this situation, your age doesn't matter. As long as you work at a job that is covered by Social Security — as are most jobs — your employer has to deduct Social Security and Medicare taxes from your paycheck, a total of 5.65 percent of earnings of up to $110,100 in 2012. In addition, your employer must pay 7.65 percent from its own pocket.
If you're self-employed and the annual net profit from your business is more than $400, you must report those earnings and pay the employee and employer shares of Social Security and Medicare contributions as self-employment taxes. You do this as part of your personal income tax return.
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