Taxes and Social Security Benefits

Taxation on Social Security has been a long debate to date with many opponents arguing that taxing retirees is unfair and amounts to double and at times, triple taxation. When taxation on this retirement benefit was initially passed, it targeted high-income earners and very few people ever got taxed due to the high threshold. However, over the years, there have been no inflation adjustments to the cap on taxation of this benefit. Because of this, there are much more people who are getting to the taxation threshold today. There has been quite some advocacy to adjust the threshold for the taxation of this benefit. However, with the outstanding government deficit that currently stands (at several trillion dollars), this may not be the time to expect a change on taxation of Social Security. The determining and calculation of Social Security taxation is a complex process.

Taxation Process

Social Security taxation depends on ones total income, including the distribution amount and other taxable incomes. If 50% of one’s federal retirement benefit plus any other taxable incomes received totals to more than $25,000.00 for individuals and $32,000.00 for couples that file jointly, then the taxpayer will be taxed on the Social Security benefits. The income is taxed to a maximum of 85% of one’s Gross Adjusted Income. However, the taxation process is not as straightforward as this. There are other tax factors, including exclusions, which make the calculation more complex. One may require the help of a tax preparer to know the exact tax obligation in case his or her income falls within the taxable bracket.

Items That Can Affect Taxation

There are various items that can affect the taxation on Social Security and whether or not one qualifies for taxation. Firstly, the qualification for taxation is not limited to the net Social Security distributions received but rather, includes even the attorney’s fees and any distributions for Workers Compensation. These other figures can easily push the threshold of the benefit to the taxable level. Another item that can easily push the figure to the taxable level is wins from gambling. Any earnings from gambling are added to the retirement benefit as part of the Gross Adjusted Income before subtracting the losses from gambling. Therefore, even if your gambling hobby yielded a loss in a given tax year, the wins will be considered separately as part of your Adjusted Gross Income; if the amount goes to beyond the taxable threshold, you will be subject to taxation. Another item that may affect the taxation of Social Security is any lump sum benefits received from one’s employer after retirement. However, there are various adjustments that are done to the lump sum payment received, especially if these funds include benefits accumulated over the working years.

Different States Handle Taxation on the Benefit Differently

Taxation on Social Security also differs from state to state. In fact, there are states where citizens are not taxed for this benefits. Some states, such as Kansas, will allow the citizens to deduct Social Security benefits from their Adjusted Gross Incomes up to a given cap to reduce the tax burden on retired taxpayers. You will therefore, need to check your state policy to determine whether you have a tax obligation and if so, how much.

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South African National Gambling Amendment Bill

I bet you’re wondering if its legal to gamble online in South Africa. If you are a poker player or regular casino player at an online casino you might be searching for answers as to your own position in all this. We will attempt to clarify this situation for you.

One Monday, Parliament passed the National Gambling Amendment Bill which seeks to regulate the remote gaming industry in South Africa. Its only waiting on President Mbeki’s signature to come into affect. But its a sure thing some political analysts say.

It basically sets out to define things that have never been present in SA gambling law until now. The Internet has expanded the South African markets reach into the unknown, and while many politicians have been debating on how to regulate it, the South African public have been exposed to various ‘poker school’ commercials while very much still being in the dark about the legality.

To put it simply, technically its currently illegal for any player to play online poker and for any casino operator to offer South African players wagers online. It been treated as a bit of a grey area for quite some time, with no-one in the industry really making moves as to what the ‘legal’ stance is. The poker rooms have been getting around this by placing ads on local TV stations in an attempt to draw attention to their properties as a ‘.Net’ ‘poker school’ – both of which are technically not illegal in SA as it is. I.e. if you go to the .net version of the site & register, you absolutely cannot wager with real cash, therefore no real cash wagering/gambling can take place, therefore there’s no breaking of current gambling law. Its unfortunate that South Africans might Google the place first and find the .net version (which incidentally isn’t searchable) and play for real on the .com version by conclusion. I bet the government has been watching these developments carefully.

The bill has been put into place recently as a bit of a catch up to global online gambling trends. I mean, the UK recently started regulating online gambling with great successes, including the protection of players, licensing and the expansion of ethical practices within the industry. The igaming industry is thriving there now.

If you are interested in reading the document, go ahead its available here. I’ve already taken the important points to take note of out below.

So whats can we take out from the bill then?

The government now recognizes the remote gambling industry as is attempting to regulate it.
The online gambling operators have to apply to get a license to operate in South Africa.
An online player may only play at a licensed online casino / poker room.
Both parties have to make sure the player is over 18 and the correct procedure is taken to prevent under age gambling (i.e. submit an affidavit).
The minister will publish in the government gazette, the regulations regarding how these gambling operators may or may not advertise. (My feeling is much the same way as land based casinos are allowed to do it with disclaimers and the like)
Just note though, that this is not a threat to your freedoms as a gambler. This is in fact just there to make sure it is legal to gamble in South Africa, that you as a player and the public are protected against illegal operations and money laundering. Of course the government hasn’t highlighted the ‘direct taxation of gambling wages’ as a main topic behind all this, but in time I guess, as they always do, will benefit from drawing funds from this $35 billion a year global revenue source.

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