Introduction

This chapter explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. It explains:

• How to figure whether your benefits are taxable,
• How to use the social security benefits worksheet (with examples),
• How to report your taxable benefits, and
• How to treat repayments that are more than the benefits you received during the year.

Social security benefits include monthly survivor and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable.

Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits.

If you received these benefits during 2001, you should have received a Form SSA-1099 or Form RRB-1099 ( Form SSA-1042S or Form RRB-1042S if you are a nonresident alien). These forms show the amounts received and repaid, and taxes withheld for the year. You may receive more than one of these forms for the same year. You should add the amounts shown on all forms you receive for the year to determine the "total" amounts received and repaid, and taxes withheld for that year. See the Appendix at the end of Publication 915 for more information.

Note. When the term "benefits" is used in this chapter, it applies to both social security benefits and equivalent tier 1 railroad retirement benefits.

Legislation in 2000 removed the "earnings test" for social security recipients who work and are ages 65 through 70. This change has no effect on the federal income tax rules for social security benefits.

What is not covered in this chapter. This chapter does not cover the tax rules for the following railroad retirement benefits:

• Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits,
• Tier 2 benefits,
• Vested dual benefits, and
• Supplemental annuity benefits.

For information on these benefits, see Publication 575, Pension and Annuity Income.

This chapter also does not cover the tax rules for foreign social security or railroad retirement benefits. These benefits are taxable as annuities, unless they are exempt from U.S. tax under a treaty. For more information, see Publication 915.

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