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SSA Email Misleads on Elimination of Tax on Social Security

The day after the federal “Big, Beautiful Bill” was passed by Congress, the Social Security Administration sent out this email to recipients:

Email from the Social Security Administration

Besides sounding somewhat political for a federal agency, it gave the false impression that the bill eliminated federal income tax on social security benefits:

The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries, providing relief to individuals and couples.

Before the bill passed, the Senate parliamentarian ruled that changes to social security could not be made in this type of bill and the provision to not tax social security benefits was completely removed from it.

*MOUSE PRINT:

So how can the Social Security Administration claim the new law includes such a provision? They point to another measure in the law — a new $6,000 senior deduction — that would supposedly offset the income taxes that would otherwise be due on social security earnings for most people. The deduction is applied against other income too, however. And as their income rises, the deduction decreases to zero and is completely phased out after 2028.

Many major media outlets over the weekend reported on the misrepresentation in the email from the Social Security Administration. (See stories from NBC, Washington Post, the New York Times, and CNN.)

I know, some of you will say these are liberal media outlets and are not objective. So, MrConsumer uploaded the entire SSA email to Google Gemini and Microsoft CoPilot and asked these AI services to “evaluate the veracity and factual accuracy” of that email.

Here is what each said about the key claim that the new law contained a provision eliminating income tax on social security benefits:

*MOUSE PRINT:

“The new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries…”:

This statement is inaccurate in its phrasing. As noted above, the law does not eliminate the taxation of benefits, but rather provides a deduction that can lead to many beneficiaries paying no tax on their benefits due to reduced overall taxable income. —Google Gemini

Claim: “The bill eliminates federal income taxes on Social Security benefits for most beneficiaries.”

– Misleading. The bill does not change the underlying tax code that governs how Social Security benefits are taxed.
– Instead, it adds a temporary deduction that applies to all income, not just Social Security. This means the tax is still technically in place, but many seniors will owe nothing due to the deduction.
– The deduction phases out for individuals earning over $75,000 and couples over $150,000, and it expires after 2028 unless renewed. — Microsoft CoPilot

What do you think? Did the SSA email cross the line? Offer your comments below, but please do not turn this into a pro or anti Tr–p rant, or a pro or anti political party diatribe.

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Is TurboTax Really Free This Year?

You may have seen the TV ads for TurboTax this year promising completely free service tax preparation and filing.

Every year, Intuit, the maker of TurboTax, advertises some type of free service but it often comes under scrutiny of consumer regulators for poorly disclosed catches as the FTC found last year. This year’s offer is bolder than ever. It promises tax preparation and filing that is 100% free if you didn’t file using TurboTax last year. While the TV ads are very clear this year, here is a summary of the catches.

*MOUSE PRINT:

  • You must use the TurboTax app to start your taxes.

  • You must file your taxes using the TurboTax app by February 18, 2025.

  • You must not have used TT last year, but use of it prior to that is okay.

  • TurboTax Live is not free.

  • The app is not appropriate for more complex tax situations such as for itemized deductions, business income, investment sales, etc. However, as long as you begin your tax prep in the app, you can switch to do it on your computer even in a more expensive product like TurboTax Deluxe or higher, whose fees will be waived, they say. But you then have to return to the app to file your taxes by the February 18th deadline.

  • It is unclear if their usual fee to file your state return is being waived.

    • Perhaps those folks with very simple returns will find this to be a tempting offer, but I can’t imagine how tedious it could become for more complex situations doing it on a cellphone.

    Here’s another option for people with simple returns. Uncle Sam has expanded its new Direct File free program to 25 states this year.

    Regular TurboTax offline users, like MrConsumer, face a number of challenges this year as well. Amazon did not run its usual sale for TurboTax Deluxe discs at the end of the year. And many people missed their November 30th sale when it was $45.99 with a $10 Amazon gift card. Also changed this year, TurboTax Deluxe is a download only product — the disc version has been discontinued.

    Costco advertised in its January Connection magazine that from January 18 to February 7 it will be offering $11 off of TurboTax Deluxe (making it $44.99), $18 off of Premier, and $20 off Home & Business. Sam’s Club will have a similar offer.

    UPDATE: Amazon has matched Costco’s price and upped the ante! The Amazon offer includes a $10 Amazon gift card when you buy TurboTax 2024 Deluxe plus State for $44.99. This will be the lowest price of the tax season if history is any guide. BUT… Amazon only offered this deal for one day, Saturday, January 18th. Now it is $44.99 without the gift card.

    [Consumer World will earn a small commission if you purchase from this link.]