Retired? The IRS still taxes up to 85% of this

Good morning! Summer’s in full swing, which means somewhere in America a retiree is opening a Social Security tax notice and saying a word their grandkids shouldn’t hear. We’ve got that story, plus three more. Onward.

This week’s lineup:

Personal Finance

👴 Yes, your Social Security can be taxed

There’s a comfortable belief that Social Security is tax-free money you already paid for. It’s a reasonable thing to assume. For most people with any other income, it’s also wrong.

Whether your benefits get taxed comes down to your “combined income.” The IRS builds it from three things: your adjusted gross income, any tax-exempt interest and half of your Social Security benefits. Run that total against the thresholds:

Those are not rich-person numbers. A retiree with a modest pension, a few IRA withdrawals and a Social Security check can land in the 85% tier without ever feeling wealthy. The thresholds have sat frozen since the 1980s, quietly pulling more retirees into the net every year.

Now the 2025 wrinkle. The One Big Beautiful Bill Act created a temporary senior deduction of $6,000 per person age 65 or older ($12,000 for a qualifying couple), good through 2028. It lowers your taxable income, which can shrink or even erase the tax on your benefits. What it does not do is make the benefits themselves tax-free. The combined-income math above still applies, word for word.

If you have any income beyond Social Security, check your combined income before you assume you’re in the clear. And if you’re 65 or older, run it with the new deduction too.

👉 Are my Social Security benefits taxable? (IRS tool)

IRS Survival Guide

📬 The IRS letter that isn’t a bill

Open a CP2000 and your stomach drops. Then your hand goes for the checkbook. Do neither of those, at least not yet.

The notice comes from the IRS Automated Underreporter system, a matching program that lines up your return against the W-2s and 1099s your employers and banks sent in. When a number doesn’t match, out comes a letter and a “proposed” amount. Proposed. Not owed.

The single most common reason for a terrifying CP2000 is that the machine doesn’t understand you bought something before you sold it. Say you bought $49,000 of Bitcoin and sold it for $50,000. Your real profit is $1,000. But your broker sometimes reports the $50,000 sale and forgets to report the $49,000 you paid. So the computer assumes you paid nothing, decides you pocketed a clean $50,000 and bills you accordingly. That’s not fraud on your end. It’s a hole in the paperwork.

The fix is almost boring. Send back the response form, check “I don’t agree,” and attach a Form 8949 showing what you actually paid. Do not file an amended return for that year. A 1040-X drops your case into a separate queue and can freeze things for months.

The clock matters most. You have 30 days from the date on the notice. Ignore it and the proposal hardens into a real bill, then a 90-day letter, then Tax Court.

👉 Understanding your CP2000 notice (IRS.gov)

Money Moves

⚖️ Your jury duty check is taxable

Jury duty pay is not a gift, a stipend or too small to bother with. In the eyes of the IRS it’s ordinary income, and it goes on your return like any other money you earned.

Most counties pay somewhere between $15 and $50 a day, and federal courts pay a little more. None of it is exempt. You’ll usually get a 1099-MISC or a plain payment statement from the court, though some courts that paid under $600 send nothing at all. That doesn’t change a thing. You still report it, you just have to track it yourself. It lands as other income on Schedule 1.

Here’s the part that trips people up. Plenty of employers keep paying your full salary while you serve, on one condition. You turn the court’s check over to them. It can feel like you never really got that money, so why report it?

Because the court still paid you, and that’s the taxable event. The flow goes like this. You report the jury pay as income. Then you deduct what you handed your employer as an adjustment on Schedule 1. The two cancel out to zero, but both lines have to show up. Skipping the whole thing because “my employer took it anyway” is the mistake.

It’s a small number for most people. It’s also a real line on a federal return, and “I didn’t think it counted” has never once impressed the IRS.

👉 Publication 525, Taxable and Nontaxable Income (IRS.gov)

Wild Tax Tales

💃 Abby Lee Miller’s $775,000 dance with prison

In December 2010, Abby Lee Miller filed for Chapter 11 bankruptcy to reorganize the debts piling up at her Pittsburgh dance studio. On paper she was barely scraping by, declaring about $8,899 a month in income.

Then “Dance Moms” premiered, and Miller turned into a cable-TV fixture. So, as it happened, did her bankruptcy judge. He was watching one night and noticed that a woman pleading poverty in his courtroom seemed to be doing awfully well on basic cable. He concluded, reasonably, that she was earning a lot more than $8,899 a month.

He was right. Miller had kept roughly $775,000 in income off the books, money from the show, its spinoffs, sold-out master classes and merchandise, routed through accounts she never disclosed.

Then it got stranger. In the summer of 2014, Miller had friends carry about $120,000 worth of Australian currency into the United States in their luggage, broken into batches small enough to dodge the rule that you report bringing more than $10,000 into the country. That’s not a paperwork slip. That’s structuring, and it’s a federal crime all by itself.

In 2016 she pleaded guilty to concealing bankruptcy assets and to failing to report the international money transfer. IRS Criminal Investigation was one of the agencies that worked the case. In May 2017 a federal judge sentenced her to a year and a day in prison, a $40,000 fine, a $120,000 money judgment and two years of supervised release. She served her time in California. The Justice Department laid out the whole saga, and the lesson is older than reality TV. Bankruptcy court and customs both run on honest disclosure, and lying to one tends to introduce you to several others.

The quick (and slightly prickly) stories we didn’t have time to get to:

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.