Social Security Quarters for Self Employed

[Kram BergGold]

In 2017, it takes $1300 of earnings to qualify for a quarter of SS credit.
If my client's net Schedule C income is $2605, does she get 2 quarters of credit or is line 4 of Schedule SE used ($2406) so she only gets 1 quarter?

[kathyc2]

In 2017, it takes $1300 of earnings to qualify for a quarter of SS credit.
If my client's net Schedule C income is $2605, does she get 2 quarters of credit or is line 4 of Schedule SE used ($2406) so she only gets 1 quarter?

Sch C less deduction for 1/2 SE tax is the amount used for SS earnings.

[TaxGuyBill]

If the taxpayer is trying to get more 'quarters' for Social Security, you may want to see if the "Optional Method" for SE tax would work better (Lines 16 and 17 of Schedule SE).

https://www.irs.gov/pub/irs-pdf/i1040sse.pdf#page=6

[Kram BergGold]

Final Answer

The amount used by SS to compute credits (quarters) is line 4 of Form SE. It is not what Cathyc2 said.
Good idea taxguybill but had already tried non farm optional and it did not work.

[kathyc2]

The amount used by SS to compute credits (quarters) is line 4 of Form SE. It is not what Cathyc2 said.
Good idea taxguybill but had already tried non farm optional and it did not work.

Could have sworn when I check my earning records on ssa.gov, they used the 1/2 se deduction, but I see it is actually just reduced by the 7.65% from SE. My bad.

On another note, I'm trying to imagine how a person could get through life without having 40 credits or having a spouse from which to tag on benefits.

[TaxGuyBill]

On another note, I'm trying to imagine how a person could get through life without having 40 credits or having a spouse from which to tag on benefits.

These are what came to my mind:

Possibility #1: Immigrants.
Possibility #2: Not married to significant other. Significant other worked and taxpayer was a stay-at-home person.
Possibility #3: Spouse is much younger and taxpayer wants to collect 'their own' Social Security before they can qualify for spousal benefits.
Possibility #4: ''Their own' benefits may be larger than spousal benefits.
Possibility #5: They are not aware of spousal benefits and think they need their own credits.

[Burke]

On another note, I'm trying to imagine how a person could get through life without having 40 credits or having a spouse from which to tag on benefits.

I had a relative who worked only a short time in the US (and this was back in the 50's when earnings were much less) before moving overseas and marrying a Frenchman. She never qualified for enough quarters to get SSA here. And she couldn't draw on her spouse's benefit because she never became a French citizen. She would have had to give up US citizenship which she did not want to do.

[Rapid Robert]

These are what came to my mind:

Possibility #1:

Possibility #6: they never reported income and paid taxes in the past. There are a lot of Americans who are tax cheats, you know.

[Rapid Robert]

Could have sworn when I check my earning records on ssa.gov, they used the 1/2 se deduction, but I see it is actually just reduced by the 7.65% from SE. My bad

It's supposed to be comparable to an employee's W-2 Box 3 wages. The 1/2 SE deduction includes Medicare, which is not relevant for SS credits.

Edit - the real reason that 1/2 of SE tax isn't the precise number is a math error in the law. Legally, the net earnings from SE factor is 0.9235. However, mathematically it should be 1/1.0765 = 0.9289. If you were to use this mathematically correct number to calculate the net earnings and apply the SE tax (0.153), then 1/2 of the SE tax would indeed be the correct amount to subtract from Schedule C net profit to get the SS earnings (which would also equal 92.89% of net profit, of course).

My original comment is correct if the net earnings from SE is over the SS wage limit for the year, then you would definitely be bringing extra Medicare into the equation that doesn't belong.

[abctax]

Firefighters & other....

On another note, I'm trying to imagine how a person could get through life without having 40 credits or having a spouse from which to tag on benefits.

My husband (retired) was in the fire service for 27 years and did not pay into social security.

Currently, the only prominent groups that do not participate in the Social Security system are railroad workers, covered by the Railroad Retirement Board, an independent agency of the U.S. government, some religious personnel and state and local government employees with their own retirement systems.

[Lion]

Including workers for state organizations, such as nurses, teachers, college professors,...