I recently posted about the circumstances under which Social Security benefits are taxable. A couple from Georgia recently lost a Tax Court case where they tried to argue that their Social Security benefits should not be taxable because the amounts they paid into Social Security had already been taxed. They made this argument even though their other income exceeded the thresholds referenced in my article.
This argument has been shot down before by the Tax Court and it was shot down again earlier this month with this couple from Georgia. From the Tax Court:
One can imagine a system of taxing Social Security benefits whereby the benefits are free of tax until they exceed the total FICA taxes paid by the recipient. Such a system was not enacted by Congress. Instead Congress enacted section 86, which, in recognition that Social Security benefits are partly financed by employees, does not require every dollar of Social Security benefits to be included in the income of the recipient. It requires only a fraction of the benefits to be included. This fraction is 85 percent for the petitioners, as the IRS correctly calculates.
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