taking early SS and still working

[oceanlovin'ea]

I have a question for you tax professionals that have reached retirement age and are still working. I am going to take my social security at 62 which is this fall. My business is small. I am a sole proprietor and my yearly earnings are less than the social security limit.

When I was filling out the application online, it asks if you will earn more than $1180 (I think that was the amount) in any month during next year. As tax professionals we earn more money during January through April and then less the rest of the year.

I think that once you draw social security you get a questionaire asking for breakdown of your income for the previous year. What do you do? Do you just divide your yearly income by 12 months? Do you put your actual income minus expenses for each month? I earn most of my income during the tax season but I need it to run my business for the whole year. So other months I would probably actually have negative income.

I hope I am making sense and you understand what I am asking. I don't want SS to take back some of my income during the first part of the year. I guess we are really considered seasonal workers.

Thanks for your help.

Linda F

[Zee]

I have a question for you tax professionals that have reached retirement age and are still working. I am going to take my social security at 62 which is this fall. My business is small. I am a sole proprietor and my yearly earnings are less than the social security limit.

When I was filling out the application online, it asks if you will earn more than $1180 (I think that was the amount) in any month during next year. As tax professionals we earn more money during January through April and then less the rest of the year.

I think that once you draw social security you get a questionaire asking for breakdown of your income for the previous year. What do you do? Do you just divide your yearly income by 12 months? Do you put your actual income minus expenses for each month? I earn most of my income during the tax season but I need it to run my business for the whole year. So other months I would probably actually have negative income.

I hope I am making sense and you understand what I am asking. I don't want SS to take back some of my income during the first part of the year. I guess we are really considered seasonal workers.

Thanks for your help.

Linda F

Linda-

I started SS a couple of years ago at 62. Since your annual income is less than the SS limit, I'd suggest simply indicating the annual amount. If you earn more than the limit, they adjust subsequent payments until it's repaid.

However, the SS folks aren't too smart and seem to focus on W2 income. I had two businesses, one was profitable - the other wasn't, and there was a net loss. I also had W2 income above the limits. I got a letter indicating the amount would be adjusted because of the W2 income. I had to visit the SSA office to fix the situation and reduce the amount of reduction. First, I called and was told I didn't need an appointment. When I arrived and signed the sign-in sheet, I was told I needed an appointment. I indicated that wasn't what I was told on the telephone. Their response, "Well, you don't need an appointment to come in, you just need an appointment to talk to someone.". LOL.

So, I raised hell and finally got to speak with a representative. My wife also has a C business which is very profitable, and substantial W2 income. The representative tried to tell me our combined income counted. So...on to a Supervisor. After about an hour, it was resolved to my satisfaction.

The point of this lengthy story is I'm not sure the SSA even looks at self-employment income and I'm not sure there's full matching with the IRS returns. They told me the matching process is several years behind. Go figure. What that means is there are probably lots of folks collecting social security with businesses earning far in excess of the limits, and even more with S-Corps. What a mess.

[Chief]

SS and Self Employment Income

Linda, all I can say is good luck on your drawing SS. One piece of advice I would give you is to have it start In Jan at the beginning of the year. Had I done that I would have saved myself a great deal of inconvenience with those folks at SS. That's like dealing with a brick wall.
I retired in a June at the end of a school year.
They could not recognize self-employment income and as a result held back several months of my SS income which they eventually returned with interest. Fortunately I had other income than SS income. Good luck and I hope you have insurance resources until you reach 65 at which time Medicare kicks in.

[OtisMozzetti]

Ocean Lovin Should Love the Rules

The monthly earnings limit during the first (calendar) year after receiving early benefits is $1130 instead of $1180. During years after the first, but before the normal retirement age (apparently age 66 for you) there is no monthly limit but an annual limit of $13,560 = 12 x $1130. If you earn above the limits during any of the limitation periods, then benefits are reduced 50 cents on the dollar because of it. During the year that you reach the normal retirement age, there is a higher limit (up above $30,000) for the period of time up until and including your birthday month. After the normal retirement age, there is no limit on earnings. The reduction in benefits for excess earnings in the year that you reach normal retirement age is only 1 dollar for every three dollars of excess earnings, not the 1 dollar for every two dollars of excess earnings.

There is a publication entitled "How Work Affects Your Benefits" available at www.ssa.gov. Earnings are supposed to be reported to Soc. Security. Earnings are supposed to go under the month in which they are earned, not the month in which those earnings are paid. That could indeed be hard to properly define with self-employment income. There is no guarantee the Soc. Security Administration would be easy to deal with about such matters, but why not assume the best and come prepared to document whatever needs to be documented.

If your benefits start in the fall, there will be only a few months of $1130 per month limit during 2008; then in future years up to the year before the normal retirement age, there is a $13,560 limit. Each of the numbers is adjusted for inflation each year.