Social Security recipients heading into the 2026 filing season may see smaller tax refunds, even as their monthly checks rise. The Social Security Administration has announced a new cost-of-living adjustment, and that higher benefit can push more of a retiree’s income into the taxable column. The rules that decide how much of a check is taxed have not moved since Congress set them, which means the tax system can quietly claw back part of the raise.
The risk is greatest for people who also have pensions, part-time wages, or investment income and who have not adjusted their tax withholding. In those cases, combined income can cross the thresholds that trigger taxation of benefits, shrinking refunds or even creating a balance due. The mechanics sit deep in IRS worksheets and SSA forms, but the effect shows up plainly when a refund is smaller than last year’s even though a retiree’s day-to-day finances feel the same.
COLA boost, static tax thresholds
The Social Security Administration’s October 2025 press release explains that nearly 71 million beneficiaries will receive a 2.8 percent cost-of-living adjustment for 2026, following a 2.5 percent increase for the prior year, according to the agency’s official announcement. In that same release, the agency states that the 2.8 percent increase is scheduled to begin in January 2026, while also noting that benefit payments reflecting the change will start on December 31, 2025, creating a narrow timing conflict inside its own description. What is clear from the document is that beneficiaries will see larger monthly payments as the new year begins, even though the tax rules that apply to those payments have not changed in tandem.
On the tax side, the IRS relies on statutory thresholds and worksheets laid out in Publication 915 to decide how much of a Social Security benefit is taxable in any calendar year. That document, formally titled “Social Security and Equivalent Railroad Retirement Benefits,” contains the base amounts and formulas that determine whether up to 50 percent or up to 85 percent of a person’s benefits for the year are included in income, depending on filing status and combined income. Because those base amounts are set in law and are not tied to the annual COLA, a 2.8 percent bump in benefits for 2026 can push more of a retiree’s check into the taxable range even when their other income has stayed flat, which is one way a larger benefit can translate into a smaller refund for that tax year.
How the IRS decides what is taxable
The IRS instructs taxpayers to report their annual Social Security benefits on specific lines of Form 1040 or Form 1040-SR and supplies a dedicated worksheet to figure out the taxable portion in the official Form 1040 instructions. That worksheet walks filers through a combined-income calculation that starts with adjusted gross income for the tax year, adds nontaxable interest, and then adds one-half of Social Security benefits received during that same year. The result is compared with the base amounts drawn from Publication 915; if the figure is high enough, a share of the benefits is pulled into taxable income, which can directly reduce a refund or increase the amount owed for that filing season.
For older taxpayers, the IRS repeats and explains these rules in its Tax Guide for Seniors, formally labeled Publication 554. That guide confirms that Social Security benefits are handled through the same reporting lines and worksheets and notes that up to 85 percent of benefits can be taxable for certain nonresident aliens in a given year. Taken together, Publication 915 and Publication 554 show how aggressive the tax treatment can be once combined income crosses the statutory thresholds. When a COLA lifts the benefit amount while the thresholds stay fixed, more people can find themselves closer to that upper limit, especially those who also draw income from retirement accounts or part-time work.
SSA’s role: thresholds and withholding choices
On the benefits side, the Social Security Administration gives recipients its own explanation of when federal income tax might apply and how to have money withheld from their checks. The agency’s online guidance on managing benefits lays out combined-income thresholds that determine when someone may owe federal tax on Social Security and describes how those thresholds interact with other income sources, while also referencing the statutory base amounts that have not changed since the late 1980s. In the same place, the SSA spells out the available withholding percentages that can be taken from monthly payments, so beneficiaries can choose a rate that better matches their expected tax bill based on those combined-income rules.
The SSA page also explains that beneficiaries can ask to have a fixed percentage of their monthly benefit withheld for federal income tax, rather than waiting for a surprise at filing time. The listed withholding options are limited to specific whole-number percentages, and they apply to the gross monthly benefit before any Medicare premiums are taken out. Nothing in this process automatically adjusts withholding when benefits rise; the SSA provides the tools and the threshold information, but it is up to each recipient to revisit their settings after a COLA, which is one point where refund surprises can arise.
Voluntary withholding and the W-4V trap
The IRS document that governs voluntary withholding from Social Security checks is Form W-4V, formally labeled “Voluntary Withholding Request.” The January 2026 revision of that form sets out the allowed withholding rates and the payment types it covers, including Social Security benefits, making clear that only certain fixed percentages can be chosen. The PDF version of the form, available directly from the IRS, shows the permitted options and explains how a beneficiary can submit the request to have tax taken out of each payment using the official W-4V form.
Alongside the form itself, the IRS maintains an “about” page describing which payments are eligible for this kind of voluntary withholding and linking to the current and prior versions of the document. That page confirms that Social Security benefits are among the eligible payments and directs users to the same W-4V reference page for details. The structure is simple: beneficiaries pick a percentage and the government withholds that share of each check. Because the percentage is fixed, a 2.8 percent COLA for 2026 increases the dollar amount withheld but does not change the fact that more of the total annual benefit may now be taxable under Publication 915’s rules, which can still leave a retiree with a smaller refund if other income is steady or rising.
SSA-1099: the January wake-up call
The reality of how much Social Security a person received, and how much tax was withheld, arrives each winter in the form of a benefit statement. The Social Security Administration explains in its official FAQ that the SSA-1099 is the Social Security Benefit Statement, and that it is mailed each January to people who received benefits in the prior calendar year, according to the agency’s benefit-statement guidance. That same FAQ details how beneficiaries who did not receive the mailing or misplaced it can request a replacement, underscoring the role of the SSA-1099 as the key document for filing a return that includes Social Security income for that year.
Behind the scenes, the SSA’s internal program manual describes the mailing window for these statements in more detail, stating that Forms SSA-1099 and SSA-1042S are sent out each year and laying out the procedures for issuing replacements. That operational guidance, which appears in the agency’s POMS system, confirms that there is a defined process for the mailing procedures of Forms SSA-1099 and SSA-1042S and for handling cases where a beneficiary needs another copy. For taxpayers, the practical takeaway is that January is the moment to compare the benefit totals and withholding shown on the SSA-1099 against last year’s figures. If the 2.8 percent COLA has raised the annual benefit while withholding choices have stayed the same, the statement will make that mismatch visible and can signal that the refund for the upcoming filing season may be smaller unless other parts of the return offset the change.
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*This article was researched with the help of AI, with human editors creating the final content.
Nathaniel Cross focuses on retirement planning, employer benefits, and long-term income security. His writing covers pensions, social programs, investment vehicles, and strategies designed to protect financial independence later in life. At The Daily Overview, Nathaniel provides practical insight to help readers plan with confidence and foresight.
