03 Feb Does my child have to file a tax return for survivor benefits?

Q. After my wife passed away in 2017, my youngest daughter was able to get a monthly survivor Social Security payment from the government. She would get this until she turned 18, or until the last month of her high school graduation. The payment stopped when she graduated in June 2020. She recently received this 1099 for these payments. Does she now have to pay tax and file a tax return?
— Dad

A. We’re sorry to hear about your wife.

Whether Social Security benefits are taxed depends on your daughter’s other income for 2020.

Other income would include items such as wages she earned and investment income, said Gail Rosen, a Martinsville-based certified public accountant.

“Add to her 2020 income half of her Social Security benefits and if this number does not exceed $25,000, then she will not owe tax on her Social Security benefits,” Rosen said. “If the answer exceeds $25,000 but is not more than $34,000, she will be taxed on half of the excess over $25,000 or half of the benefits, whichever is lower.”

Rosen offered this example:

Let’s assume your daughter earned $18,000 in wages in 2020, $2,000 in interest income and Social Security benefits of $20,000. Her income plus half of her Social Security benefits equal $30,000. Your daughter must include $5,000 in her federal taxable gross income (1/2 ($30,000 – $25,000) which is less than half of her Social Security benefits, Rosen said.

Social Security benefits are not taxable for New Jersey income tax purposes, she said.

“If she has no other income besides her Social Security benefits, your daughter does not have to file a tax return,” Rosen said.

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This story was originally published on Feb. 3, 2021.

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