Preacher SS Ripoff

[Snaggletooth]

Social Security questioned 2007 income from preachers as exceeding the amount allowed for persons less than full retirement age, and attempted to assess the "excess earnings penalty". The penalty requires one dollar to be repaid for every two dollars in "excess" earnings.

Example: you are 62 and drawing SS, and have $25,000 in earned income. If the earnings limit is $22,000, Social Security would withhold $1500 (1/2 of $25K - $22K) from your social security check.

I had a preacher in this situation, but SS had miscalculated the earned income. This was brought up last year on this forum, and there was discussion that SS had made wholesale gross errors in their calculation of earned income for preachers, and was having to stop the excess penalty because these calculation errors were so widespread.

Any more on this? Looks like my preacher was hit with the penalty anyway....

[thomtax]

I have a preacher that just signed up and is getting penalized.

LT

[ChEAr$]

I have a preacher that just signed up and is getting penalized.

LT

I don't see how there could be any refiguring or penalization if the schedule se is
completed correctly.

[thomtax]

Before this pastor filed, he was led to believe that the amount that would be used to calculate this take back would be the figures on the 1040. However, after all was processed, they are using the figures from the SE form, which includes housing allowance, something that is not taxed. This brought on a much larger figure.

He accepts this, but just feels, as do I, that you should not be led to believe things are figured one way and then a different set of figures is used when paying. Sort of like changing the rules after the game has started.

LT

[gkaiseril]

Quite clearly many do not understand non-taxed income. SSA does not see the entire tax return, only the necessary information from Schedule SE and probably not the worksheets. So the SSA employee might not even understand what in taxed income and earned income subject to SE tax and can not properly explain this situation to a clergy member. And it is unfortunate that this occurs. Maybe if the details about how the income subject to SE tax is computed the SSA may reconsider the situation, but do not expect the counter person to understand this.

[joanmcq]

And since they paid SE tax on the housing allowance, why would you not assume SS is calculated on the housing allowance? earned income is earned income. and since the amount the preacher is PAID in SS is determined by the amount paid in, why should the preacher get freebies where if anyone else retires early they get dinged for it?

[gkaiseril]

The SSA employee apparently said wages on the 1040 not realizing that there are certain individuals that have non-income taxed benefits added to their SE income. Clearly the clergy member was mislead on how this was to be handled.

I am sure the clergyman would have been better prepared for this if he had been provided the correct information. And the housing allowance can be quite significant with respect to his income.

[Lion]

Ssa

Please discuss this with the SSA. Perhaps, your teaching can lead to some improvements in their training.

[joanmcq]

Also, if he just applied for benefits, he can choose to pay them back and defer collecting to a later date.