How can collecting Social Security lead to an increase in your tax liability?

One very common problem we see at the office arises when people begin collecting Social Security yet are not fully retired. When you begin collecting Social Security, the government considers you as “retired” and does not expect you to continue working or have any additional sources of income. Under these circumstances, the Social Security that you collect is not taxable. What we have noticed is that mindset is outdated. People today have the ability to work well into their 70’s and are also always looking to invest their money to continue earning income even after they stop working. The tax code states that an individual earning more than $25,000 will be subject to have up to 85% of their social security benefits taxed. Therefore, if you are planning to collect social security while continuing to work or collect on investments, you need to be sure to have enough taxes withheld from your social security paycheck.