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Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Social Security
Satisfied Customers: 16560
Experience:  Licensed CPA, CMA, CFE, CGMA M.Accy Also Teach Accounting courses at Master's Level
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I just turned 62 and filed for SSI retirement benefits. I

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I just turned 62 and filed for SSI retirement benefits. I earned $38,657 this year through June. I then became unemployed. I was approved for SSI retirement of $1,634 a month. My retirement was effective in September, my first check would be coming on Oct 23. Last week I became an outside consultant for my previous employer. No taxes withheld, I will get a 1099 at the end of the year. I believe that makes me self-employed. Will the self-employed income in this year (from Oct through Dec) be used to deduct income from my Social Security Check?

Megan C :

I realize you have a question about social security. My goal is to provide you with excellent service, and help you better understand your options.

Megan C :

How are you today?

Megan C :

Self employment income, like regular employment income, is used to offset your social security earnings if you are under full retirement age.

Megan C :

In your case, your benefits will be reduced $1 for every $2 you earn over $15,120

Megan C :

This includes both your work through June and your new consulting income.

Megan C :

However, the consulting income is only counted as your net income after you deduct business expenses.

Megan C :

Social security will become aware of these earnings when you file your income tax return at the end of the year.

Customer:

I thought these earnings would not be counted against SSI income in the year I filed, but would be counted in each subsequent year. I thought my income for this year, 2013 would not affect by SSI income. But next year i would be limited to earned income of $15,120.

Megan C :

No, it's any year that you are under full retirement age that you are impacted by that.

Customer:

The $38,657 was earned from Jan. through June. I filed for SSI in September. I thought income only started counting once you filed for SSI retirement benefits.

Megan C :

There is a special first year rule, but to get that rule you cannot earn over $1,200 in a month or have substantial gainful activity - you have to truly retire. If you have become a consultant, you have not truly retired.

Megan C :

"Substantial services in self-employment" means that you devote more than 45 hours a month to the business or between 15 and 45 hours to a business in a highly skilled occupation.

Megan C :

http://www.socialsecurity.gov/retire2/rule.htm

Customer:

Ah! Now I see why they ask these questions in the questionaire. For next year, I do not know if I will be allowed to continue as a consultant. The firm is using me on a 4 week basis right now. Because I don't have a contract what should I reasonably tell SSI on their form for 2014? Tell them $15,000 and if I start earning more, report it to SSI?

Megan C :

yes, that is what I would do for simplicity's sake

Megan C :

And you would only be eligible for your benefit for September and October, then not November and December under the first year rule.

Customer:

Thank you, XXXXX XXXXX to understand.

Megan C :

Is there anything else you need clarification on?

Customer:

Does SSI go by when you work or when you get paid? This could be weeks apart.

Megan C :

It goes by when you work for the first year rule, because of the hour limitations.

Megan C :

Earnings test goes by when paid.

Customer:

Thanks!

Megan C :

You're welcome.

Megan C and 2 other Social Security Specialists are ready to help you
Thanks, Tom for your positive rating and generous bonus. It was a pleasure working with you today. If you need any further clarifications, please do not hesitate to contact me! Come back and see me whenever you need to answer a tax, finance, or social security question. Thanks!