SE Tax, Option to Pay In

[geekgirldany]

I have a customer that has had losses for several years. Losses have been caused by machinery/equipment being purchased. He is 61 and would like to draw his social security benefits early. He called the SSA and they said because of last year (2007) his benefits would be half what it should be. In 2007 large loss. The lady at SSA told him if he would have paid in $650 in social security/SE tax for 2007 his benefits would not be cut in half. He is now wanting to figure out a way to pay this.

I want to make sure that I understand this correctly. A taxpayer can pay in SE Tax through the non-farm method:
Nonfarm optional method, the net nonfarm profits must be less than $1,733 and less than 72.189% of gross nonfarm income.

Also, the client must be regularly self-employed, which means the actual net earnings from self-employment were $400 or more in 2 of the 3 years preceding the year the client uses the nonfarm method.

He has had losses for all but 1 of the past 3 years. So I think he can not use this.
Is there any other way he can pay in to get his benefits? Or is this the only option?

Thank you

[Bees Knees]

Assuming he has paid into Social Security for at least 10 years, Social Security benefits are based on the average of the highest 35 years of work history. One year of losses would NOT cut his benefits in half. The lady must have been on drugs.

[gkaiseril]

Your client also gets credit for jobs for which he was paid wages and FICA and Medicare Tax was withheld.

Your client should request an earnings statement from SSA.

[geekgirldany]

I've been doing his taxes for 8 years. I have copies back to 96. He has losses every year except for 4 years. 2 years were from farm income. He has not paid into social security for a straight 10 years. He may have previously before. He has had two businesses that I know of. I am not sure how the first one done. I'll find out if he has a earnings statement. I know I get one every year. I also do a little more research.

Thank you for answering.

[drdino]

10 years

It does not have to be 10 'Straight' years, just 10 years, or 40 quarters. There is no way there would be half reduction because of any one year. The SSA mails out an explanation of benefits every year about 3 months prior to birthday. It can also be ordered on their website.

[Black Bart]

Dany,

I don't know if there are any exceptions to that two out of three years, but I suggest you call an SSA office (usually one is located in nearby large towns) and talk to another representative. I've had SSA agents tell me something like what your first one did, but I called the office again, got a different agent, and they told me something completely different (and occasionally more favorable). If it's a small office and you're afraid you might get the same rep, then try this national SSA number (I think it's Baltimore): 800-772-1213.

[veritas]

Link

http://www.socialsecurity.gov/mystatement/howfigured.htm

[OtisMozzetti]

Maybe it is Disability

Searching as we are for a reason that his benefits would be cut in half, I wonder whether he is trying to collect benefits at age 61 or whether he plans to wait until he is 62. You have to be 62 to collect retirement benefits on your own record; he could collect as a widower at 60. A possible explanation is that he is out to claim disability, which requires a certain number of quarters of coverage within the last X years.

[geekgirldany]

Your right it is for disability. I called him today and he is bringing the earnings statement. I asked him if he was just planning for when he turns 62 or was he needing to go on disability. He said if he could he wanted to on disability because of some medical problems that have come up. So that is where the limitation is coming in I bet.