Social Security payment deductions

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 provides the legal basis for Medicare premium deductions and federal taxes withheld from your Social Security monthly payment. The legal basis for rounding the payment amount is also described. Examples are provided at the end of this article.

Except for the introduction and legal overview, this article is based on (contains a link to the original post with updates).

Introduction
Social Security may withhold amounts from your monthly benefit. Known as a deduction, part of your payment may be withheld for:
 * Medicare Premium payments,
 * Overpayment of Social Security or Supplemental Security Income (SSI) benefits,
 * Excess earnings,
 * Voluntary income tax withholding,
 * Payment of your appointed representative.

The federal government can also garnish benefits in certain circumstances.

This article only focuses on Medicare Premium and voluntary income tax withholding deductions.

Legal overview
Authority for federal agencies is based on US law and is codified here: Office of the Law Revision Counsel, by the United States House of Representatives.

Relevant sections of the actual US law directing Social Security to deduct Medicare and federal taxes from your payment, as well as rounding your payment amount, are shown.

Law is cited in a format as "(title number) U.S.C. § (section number).". For example, US Code Title 42 Section 415 is cited as "42 U.S.C. § 415.".

Social Security employees use the Program Operations Manual System (POMS) as the primary source of information to process benefit claims. The POMS is shown where applicable.

Social Security program rules
The Social Security program is defined by rules which include the law; regulations; Commissioner rulings; and, employee operating instructions.

See: Social Security Program Rules

The law which governs Social Security is defined in the Social Security Act. Compilation of Social Security Laws (Volume I) contains the full text of the Social Security Act, as amended, and selected provisions of the Internal Revenue Code.

In the Social Security Act Table of Contents, drill down each Title section to find the relevant sections of US code which modify the Social Security Act.

For example, Title XVIII "Health Insurance for the Aged and Disabled" --> [https://www.ssa.gov/OP_Home/ssact/title18/1840.htm Sec. 1840. Payment of premiums] Results in:


 * Sec. 1840. [42 U.S.C. 1395s] (a)(1)...

which means that Section 1840 of the Social Security Act appears in US Code under Title 42 Section 1395s. This is the Medicare premium withholding as described below.

For this article, the relevant sections of the Social Security Act are located in US Code as follows:


 * Sec. 215 [42 U.S.C. 415]: Computation of primary insurance amount
 * Sec. 1840. [42 U.S.C. 1395s] Payment of premiums
 * Sec. 1854. [42 U.S.C. 1395w–24] Premiums and Premium Amounts
 * Sec. 1860D-13. [42 U.S.C. 1395w-113] Premiums; Late Enrollment Penalty

Withholding of Medicare Premiums
United States Code:
 * Title 42 — The Public Health And Welfare (link)
 * CHAPTER 7—SOCIAL SECURITY (sections 301 to 1397mm) (link)
 * SUBCHAPTER XVIII—HEALTH INSURANCE FOR AGED AND DISABLED (sections 1395 to 1395lll) (link)

Subchapter XVIII Part B
Must be withheld from your SS benefit payment


 * 42 USC § 1395s. Payment of premiums (link)
 * (a)Deductions from section 402 or 423 monthly benefits
 * (1) In the case of an individual who is entitled to monthly benefits under section 402 or 423 of this title, his monthly premiums under this part [Part B] shall (except as provided in subsections (b)(1) and (c)) be collected by deducting the amount thereof from the amount of such monthly benefits.

Subchapter XVIII Part C
Optional withholding from SS benefit payment [in same manner as Part B].


 * 42 USC § 1395w–24. Premiums and Premium Amounts (link)
 * (d) Terms and Conditions of Imposing Premiums.
 * (2) Beneficiary’s option of payment through withholding from social security payment or use of electronic funds transfer mechanism. In accordance with regulations, an MA organization shall permit each enrollee, at the enrollee’s option, to make payment of premiums (if any) under this part [Part C] to the organization through
 * (A) withholding from benefit payments in the manner provided under section 1395s of this title with respect to monthly premiums under section 1395r of this title;
 * (B) an electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account); or
 * (C) such other means as the Secretary may specify,

Subchapter XVIII Part D
IRMAA (Income Related Monthly Adjustment Amount) must be withheld from SS benefit payment [in same manner as Part B].


 * 42 USC § 1395w-113. Premiums; Late Enrollment Penalty (link)
 * (c) Collection of Monthly Beneficiary Premiums.
 * (4) Collection of monthly adjustment amount.
 * (A) In general. Notwithstanding any provision of this subsection or section 1395w–24(d)(2) of this title, subject to subparagraph (B), the amount of the income-related increase in the base beneficiary premium for an individual for a month (as determined under subsection (a)(7)) shall be paid through withholding from benefit payments in the manner provided under section 1395s of this title.

IRS tax withholding
The withholding is based on the payment, not the benefit. The lowest three income tax brackets are 10%, 12%, and 22%; they used to be 10%, 15%, and 25%. When the income tax brackets change, your election does not unless you make a new request.

United States Code:
 * Title 26—Internal Revenue Code (link)
 * Subtitle C—Employment Taxes (sections 3101 to 3512) (link)
 * CHAPTER 24—COLLECTION OF INCOME TAX AT SOURCE ON WAGES (sections 3401 to 3456) (link)


 * 26 USC § 3402. Income tax collected at source (link)
 * (p) Voluntary withholding agreements
 * (1) Certain Federal payments
 * (A) In general If, at the time a specified Federal payment is made to any person, a request by such person is in effect that such payment be subject to withholding under this chapter, then for purposes of this chapter and so much of subtitle F as relates to this chapter, such payment shall be treated as if it were a payment of wages by an employer to an employee.
 * (B) Amount withheld The amount to be deducted and withheld under this chapter from any payment to which any request under subparagraph (A) applies shall be an amount equal to the percentage of such payment specified in such request. Such a request shall apply to any payment only if the percentage specified is 7 percent, any percentage applicable to any of the 3 lowest income brackets in the table under section 1(c), or such other percentage as is permitted under regulations prescribed by the Secretary.
 * (C) Specified Federal payments For purposes of this paragraph, the term "specified Federal payment" means (i) any payment of a social security benefit (as defined in section 86(d)),

Rounding of tax withholding

 * Social Security POMS GN 02410.015 Voluntary Tax Withholding (VTW) (link)
 * B. Policy For VTW Benefit Withholding
 * 5. VTW withholding amount If requested, calculate the dollar amount a particular percentage of his benefit represents and round the resulting amount to the nearest dime.

Social Security
United States Code:
 * Title 42 — The Public Health And Welfare (link)
 * CHAPTER 7—SOCIAL SECURITY (sections 301 to 1397mm) (link)
 * SUBCHAPTER II—FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS (sections 401 to 434) (link)


 * 42 USC § 415. Computation of primary insurance amount (link)
 * (g) Rounding of benefits The amount of any monthly benefit computed under section 202 or 223 which (after any reduction under sections 203(a) and 224 and any deduction under section 203(b), and after any deduction under section 1840(a)(1) [Part B premiums]) is not a multiple of $1 shall be rounded to the next lower multiple of $1.

Social Security POMS

 * POMS RS 00601.020 Rounding of Benefits (link)
 * D. Policy For Lower Dollar Rounding
 * 4. Adjustments applicable after lower dollar rounding The following deductions or adjustments are made after lower dollar rounding: Deduction for Part D premium;

Payment deduction examples
Note that your actual benefit is not what is in the letter they send you.

Example 1
Under 65, no income tax withholding:
 * Benefit = $2764.80
 * Deposit received = $2764 (this will be in your benefit letter, not the actual benefit of $2764.80)

Example 2
Under 65, income tax withholding of 7%:
 * Benefit = $2764.80
 * Benefit paid = $2764 (benefit in your letter = $2764)
 * Withholding calculated = $193.48
 * Withheld amount = $193.50 (nearest dime)
 * Deposit received = $2570.50

Example 3
65 plus, Part B, no income tax withholding:
 * Benefit = $2764.80
 * Part B premium = $148.50
 * Benefit after Part B = $2616.30
 * Deposit received = $2616 (benefit in your letter = $2764.50, so net is whole dollar after Part B)

Example 4
65 plus, Part B, income tax withholding of 7%:
 * Benefit = $2764.80
 * Part B premium = $148.50
 * Benefit after Part B = $2616.30
 * Benefit paid = $2616 (benefit in your letter = $2764.50)
 * Withholding calculated = $183.12
 * Withheld amount = $183.10 (nearest dime)
 * Deposit received = $2432.90

Example 5
65 plus, IRMAA (B and D), income tax withholding 25%:
 * Benefit = $2764.80
 * Part B premium = $475.20
 * Benefit after Part B = $2289.60
 * Benefit dollar rounded = $2289 (benefit in your letter = $2764.20, so whole dollar after Part B)
 * Part D premium = $70.70
 * Benefit after Part D subtracted = $2218.30
 * Withholding calculated = $554.58 (after reduction for premiums)
 * Withheld amount = $554.60 (nearest dime)
 * Deposit received = $1663.70