Earnings Subject to Social Security Taxes

Dear Robert,

I am USA citizen 66 years old. I am working abroad and paid my federal tax for more than 10 year without paying SS and health care tax. Can I pay the missed tax for this period?

Regards

Hi. No. You cannot voluntarily pay Social Security taxes to become insured for benefits or increase your benefit rate. If you have wages that are subject to Social Security taxes, your employer is responsible for withholding and paying the required Social Security taxes. If you have net earnings from self-employment in the U.S., you would pay the required Social Security taxes when you file your tax returns.

It is possible to file delinquent or amended tax returns to report and pay Social Security taxes on self-employment earnings, but you can only get Social Security credits if the tax return is filed within 3 years, 3 months, and 15 days of the end of the tax year in which the self-employment profits were earned.

Be well, Robert

Hi Robert,

How do I report my income on a part-time job IF MY EMPLOYER does not take out taxes and I do a 1099 as a subcontractor. I’m making $1,000 a month.

Hi. You would report that income on your tax return as self-employment. I'm not a tax expert, but you can find more information on the following IRS website: 

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center

For Social Security purposes, the countable amount would be your net earnings from self-employment (NESE), which is calculated on Schedule SE of your tax return.

Be well, Robert

Dear Robert,

We have a Corp, my husband & I are president & secretary. My daughter works for us too. I am 62 & I want to maximize my retirement at 70 or 72? Should I up my income or can I just up the amount I pay?

Hi. Here's what I can tell you. You can't voluntarily overpay Social Security taxes in order to increase your benefit rate. If you raise your salary you may be required to pay more Social Security taxes, which could potentially increase your benefit rate. However, based on IRS and Social Security regulations the amount that you pay yourself in salary is supposed to be commensurate with the services you perform.

Furthermore, Social Security retirement benefits are based on an average of a person's highest 35 years of Social Security covered wage-indexed earnings, so a relatively few years of higher earnings may not have as much of an effect on your future benefit rate as you may be thinking. You and your husband may want to strongly consider contacting me. I use software that will fully analyze the options available to you in order to determine your best strategy for maximizing your benefits.

Be well, Robert

Dear Robert, 

I am a US citizen, 46, and have been living in Europe since 2013. I'm starting to worry about my SS situation and wondering if I should be paying into SS even while I am working abroad in Europe…and if so, how do I do that? My jobs over there, obviously, are not contributing to it. Moreover, I went back to school in 2010 and I am in a researcher position in Berlin. Although I pay both US and German taxes, I don't know how I should be planning ahead so that I receive a decent SS when I retire. My income is not surpassing 40K/year at this time but I hope it will soon improve.

Thanks for any advice you can offer.

Best,

Hi. You aren't allowed to pay U.S. Social Security taxes on a voluntary basis, so there's no way to build up your future Social Security benefit while you're working in foreign employment. Your Social Security retirement benefit rate will be based on an average of your highest 35 years of U.S. Social Security covered wage-indexed earnings, so unless you resume work in the U.S. you'll undoubtedly have a number of zero earnings years included in your average. There's really nothing you can do to change that, though, assuming that you remain outside of the U.S.

Be well, Robert

Dear Robert,

I will soon be requesting my retirement benefits to start on my 70th birthday this December (and not a day earlier - in the remarks section). In reviewing my taxed SS Earnings record there are a few years where the SS earnings are less than the gross earnings on my 1040 form. It looks like SS is reporting my self employment earnings net of expenses rather than the gross earnings. Is that correct? Should I make an appointment with a local SS office to review before filing for benefits?

Hi. Yes. You only pay Social Security taxes on your net earnings from self-employment (NESE), not the gross amount. Thus, your NESE is what should be credited to your Social Security earnings history.

I don't know of any reason why you'd need to speak with anyone at Social Security if you plan to apply online, unless you have specific questions to ask them.

Be well, Robert

Hi Robert,

I am a retired teacher in TX. I left teaching briefly. When I returned they started taking out for Social Security so I have 28 credits, if I work as a Substitute teacher will I acquire more credits?

Hi. Possibly. You can earn a quarter of Social Security coverage (QC), up to a maximum of 4 QCs, for each $1470 that you earn this year, but only if you pay Social Security taxes on the earnings (https://www.ssa.gov/OACT/COLA/QC.html). I have no way of knowing whether or not the substitute teaching that you're referring to would be subject to Social Security taxes, though.

You would need at least 40 QCs to be able to qualify for Social Security retirement benefits, and your benefit rate could be lowered if you also receive a pension based on your earnings that were exempt from Social Security taxes (https://www.ssa.gov/pubs/EN-05-10045.pdf). You may want to consider contacting me for a consultation. I use software to help you with your Social Security planning. The software could help you determine how much you might qualify for if you do reach 40 QCs.

Be well, Robert

Hi Robert ,

I worked 5 years for a Houston based company overseas. I received a W2 from the Houston office and paid US Income Taxes. Neither my employer or myself - nobody paid into Social Security.

I did not know about benefits. Now I work locally and realized I am not qualified for Social Security benefits because I have only paid into 4 years.

Can a big corporation get away with this, they deducted my taxes, gave me W2 but did not pay into my SS.

Please advise.

Hi. There are different types of tax withholdings, and you only get Social Security credits for earnings on which you paid Social Security taxes. If your employer withheld Social Security taxes from your wages, then they should have reported your earnings to Social Security. In that case you can get credit for those earnings by showing copies of your W-2 forms to Social Security. However, if your employer only withheld income taxes and not Social Security taxes, then your employment situation probably made your wages exempt from Social Security taxes. And in that case, you can't receive Social Security credit for those earnings.

Be well, Robert

Hi Robert,

I was married for 23 years. Now divorced. My husband owned several businesses which I helped. Now I look at my social security statement and he is getting the highest amount at every age level. Me? I am getting only small amounts at every age level. Through this marriage I was a flight Attendant who flew my minimum so I could help out with our business. We both have always worked since we were 18 years old. Why is my amount so much less?? We filed jointly for all those years.

Thank you,

Hi. Most husband and wife businesses report their earnings as sole proprietorships. What that means is that the main owner operator of the business pays the Social Security taxes and gets all of the Social Security earnings credits for profits from the business. It doesn't matter whether or not you file your taxes jointly as far as Social Security is concerned. All earnings credits from a sole proprietorship go to the member of the couple whose Social Security number is listed on Schedule SE of their federal tax return.

It is possible to retroactively move the earnings credits from a joint business from one spouse's Social Security earnings record to the earnings record of the other spouse, but only if the business operated in effect as a partnership. For details, refer to the following section of Social Security's operations manual: https://secure.ssa.gov/apps10/poms.nsf/lnx/0301802334. To accomplish that, though, your ex-spouse would almost certainly need to agree to the change. Furthermore, shifting earnings credits from your husband's record to your record could adversely affect any divorced spousal or survivor benefits for which you may qualify for now or in the future.

Be well, Robert