Dear Savvy Senior

Do I have to pay income tax on my Social Security benefits? I just turned 62 and am seriously considering early retirement. What can you tell me?

Ready to Retire

Dear Ready,

When you start collecting your Social Security retirement benefits, a portion of it might be taxable depending on your total income level and marital status. Heres what you should know.

Crunch your numbers

About one-third of people who get Social Security have to pay income taxes on their benefits.

To figure out if your benefits will be taxable, youll need to add up all of your taxable income from pensions, wages, interest, dividends and other sources, plus any tax exempt interest you earned (such as interest on municipal bonds) and one-half of your Social Security benefits. (Youll receive an SSA-1099 form in the mail each January reporting your Social Security benefits for the previous year.)

To help you with the calculations, get a copy of IRS Publication 915 Social Security and Equivalent Railroad Retirement Benefits, which provides detailed instructions and worksheets.

You can download it at www.irs.gov/pub/irs-pdf/p915.pdf.

Worksheets can also be found in the IRS 1040 (www.irs.gov/pub/irs-pdf/i1040.pdf) and 1040A (www.irs.gov/pub/irs-pdf/i1040a.pdf) instruction booklets.

To receive any of these publications via mail, call the IRS at 800-829-3676 and order them.

Taxed or not

After you do the math, Uncle Sam says if youre single and your total income from all of the listed sources is:

Less that $25,000, your Social Security will not be subject to federal income tax.

Between $25,000 and $34,000, up to 50 percent of your Social Security benefits will be taxed at your regular income-tax rate.

More than $34,000, up to 85 percent of your benefits will be taxed.

If youre married and filing jointly and the total from all sources is:

Less that $32,000, your Social Security wont be taxed.

Between $32,000 and $44,000, up to 50 percent of your Social Security benefits will be taxed.

More than $44,000, up to 85 percent of your benefits will be taxed.

If youre married and file a separate return, you probably will pay taxes on your benefits.

How to file

If you find that part of your Social Security benefits will be taxable, youll need to file using use Form 1040 or Form 1040A. You cannot use Form 1040EZ. You also need to know that if you do owe Uncle Sam, youll need to make quarterly estimated tax payments to the IRS or you can choose to have it automatically withheld from your benefits.

To have it withheld, youll need to complete IRS Form W-4V, Voluntary Withholding Request (www.irs.gov/pub/irs-pdf/fw4v.pdf), and file it with your local Social Security office.

You can choose to have 7 percent, 10 percent, 15 percent or 25 percent of your total benefit payment withheld. If you subsequently decide you dont want the taxes withheld, you can file another W-4V to stop the withholding.

State taxes

In addition to the federal government, 14 states Colorado, Connecticut, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia tax Social Security benefits to some extent too. For details, check with your state tax agency or visit retirementliving.com click on Taxes by State.

Savvy tip: For more information on taxable Social Security benefits call the IRS help line at 800-829-1040, or visit an IRS Taxpayer Assistance Center (see www.irs.gov/localcontacts) where you can get face-to-face help.

Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of The Savvy Senior book.