The new Social Security Fairness Act makes big changes to benefits for workers who get pensions. Lisa Greene-Lewis, TurboTax expert and CPA, explains.
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00:00We're calling all public service workers.
00:08There is a new Social Security Fairness Act in town that was signed by the former president,
00:13and you need to know about it because it's going to affect your tax return.
00:16Lisa Green Lewis, TurboTax expert and CPA is here with us to explain everything.
00:20I love how he got this in under the gun, but at least it's a good thing for workers out
00:25there, right?
00:26Yes.
00:27It eliminates the windfall elimination provision and the government pension offset.
00:33So what those did, if these workers like firefighters, police officers, if they paid into a pension,
00:42which they typically do, but also had a job that paid into Social Security, they were
00:48getting a lower benefit.
00:50But what this Social Security Fairness Act does, it eliminates those provisions and allows
00:57them to get the full benefit.
01:00That's amazing actually, and probably high time.
01:03So now how, so this will affect their 2024 tax return.
01:07So what do they need to know when they start to fill things out?
01:10How does this affect their bottom line?
01:12Yes.
01:13So two things that this Social Security Fairness Act did.
01:19One of them is they're going to get retroactive pay to January 1st, 2024.
01:25So they're going to get a lump sum payment.
01:27And then the second thing it's doing is it's increasing their monthly Social Security.
01:33So the tax implications of that on the lump sum payment, that could make the rest of their
01:41Social Security taxable, because there are thresholds at which your Social Security is
01:47taxable when you're getting other income, like a pension.
01:51So it could possibly make that entire amount taxable.
01:57And then you had mentioned their full benefits.
01:59So their benefits will go up.
02:00So that also could affect the taxability, right?
02:03Yes.
02:04That's something they need to consider.
02:05Right.
02:06So when they're doing their tax returns, they have to be super careful about this.
02:09So now how do they figure this out?
02:11Do they have to crunch these numbers?
02:13Who's figuring out these numbers for them?
02:18With TurboTax, we automatically figure it out for you based on what income you put in,
02:24when you put in the Social Security and your other streams of income.
02:28It's automatically figured out for you.
02:31Or you can just hand your taxes over to our TurboTax Live full service experts so you
02:36don't have to worry about it.
02:38But basically, they don't have to sit down pen and pencil and try to figure out how much
02:43their lump sum payment should be.
02:44No one out there is going to do this for them.
02:47Right.
02:48But they can if they want to know ahead of time.
02:52So it goes by your combined income.
02:54And combined income is your other income that you receive, like from your pensions, then
03:02half of Social Security.
03:05And then depending on what that number is, a certain percentage of your Social Security
03:10is taxed.
03:11Up to 85%.
03:13All right, Lisa, this all sounds great and our police officers and firefighters deserve
03:18this increase.
03:19But when can they actually expect to see money in their wallets and which tax return does
03:24this start to affect?
03:27So there's talk of it going out the end of December of 2025.
03:32But then there has been mention of delays in that.
03:36And then as far as when you claim it, so if you did receive it in December 2025, you would
03:42claim it in on your 2025 taxes, but you also can have a choice.
03:48If your income was lower in 2024, you could claim it in that year.
03:54You're able to make a decision on which year you want to claim it in.
03:59OK, so not surprising, Social Security is complicated.
04:02Make sure you get some help.
04:03But it's in the news.
04:04It'll be talked about.
04:05So pay attention.
04:06Lisa Greene-Lewis, CPA and TurboTax expert, thank you for clarifying all that.
04:11Thank you for having me.