Docket No. 13970-19
December 6, 2021
US Tax Court petitioner resided in Colorado and filed her petition with the court in order to issue a decision in regards to the taxability of social security benefits.
The taxpayer received a notice of deficiency for over $3,400 in additional tax.
For the taxable year 2016 (single taxpayers), section 86 provides that a taxpayer with modified adjusted gross income plus 1/2 of the Social Security benefits that exceed an “adjusted base amount” of $34,000 must include 85% of the Social Security benefits ( and Social Security Disability benefits) into their gross income. Sec. 86(a)(2), (c)(2).
The IRS reviewed the taxpayer’s tax return and calculated the gross taxable amounts as:
$24,200+ in social security
$73,800+ in other income.
What error did the taxpayer make here? The taxpayer erroneously calculated the taxable portion of her social security benefits by looking at the total disability award from her employer-provided disability plan, before the required Social Security Disability benefit offset. Therefore, the Social Security benefits are subject to the
provisions of section 86 and must be included in the taxpayer’s gross income.
