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Stephanie O Joy, Esq
Stephanie O Joy, Esq, Soc. Sec. Attorney
Category: Social Security
Satisfied Customers: 13283
Experience:  19+ years legal exp. - 10+ years owning/operating her own SSD Law practice.
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I am yrs and collecting ss and still working. Why do I still

Customer Question

I am 69 yrs and collecting ss and still working . Why do I still have to pay ss taxes and medicare tax. self employed.
Submitted: 1 year ago.
Category: Social Security
Expert:  Stephanie O Joy, Esq replied 1 year ago.

Good morning,

SS tax, and Medicare tax, are income taxes, not dissimilar to your federal, state and local income taxes. As you likely are aware with regard to the latter, we pay them when we have INCOME. Even if we are using or not using the projects and programs they are intended to cover, it is irrelevant, we pay income tax on income. Even if we don't drive, we pay those income taxes to keep our roadways in order.

SS is similar, except we don't pay that tax on ALL income, but only that from working. So we don't have to pay it on investment income, prizes, inheritances, etc. However, given that it is an income tax, so long as you have income from the source it specifies (work income), just like other income taxes, it doesn't stop being due simply because we are collecting SS insurance benefits. You can look at it like this as well: when we pay premiums on health insurance and then actually draw those health insurance benefits, our carrier does not say, OK, you no longer have to pay your premiums for your coverage but we will still pay you your benefits, your hospitalization, doctor visits, prescriptions, etc. No, our obligation to pay those health premiums continues, as that is what is required to keep the policy in force. (SS is different in other ways, but that is simply an example of a similarity.)

Medicare is health insurance. Once we hit 65, we can use it, are covered, IF we continue to pay our medicare health insurance premiums - because if we don't pay the premiums, that coverage also will end. The government, like an employer, pays are large part of our premiums once we are 65 (out of those Medicare taxes we paid AND our neighbors are still paying if they are working, and we are paying if we are still working), then we also pay a CURRENT contribution to our own premium (i.e. the $104.9/mo for Part B) - again, not so different from the employer provided insurance, which usually pays part of our CURRENT premium, while having us pay part also. And, aside from current premiums, there is a medicare tax on our income (even on those not able to use Medicare, must pay it), which helps, presumably, maintain a fund for the future payment made by government for its share of the Medicare premiums that future retirees will need to have covered.

Expert:  Stephanie O Joy, Esq replied 1 year ago.

As much as I too think our taxes in general are exhorbitant with lots of government waste (and I too am self employed, so that 15+% SE tax is killer), I hope this at least explains the "in theory" aspect of why we still pay taxes on our working income once we claim our insurance benefits, be they SS or Medicare.

Expert:  Stephanie O Joy, Esq replied 1 year ago.

Also, did you know that if your income is on a decently high side relative to some of the lower years of your 35 years of work, (and definitely if you had less than 35 years of work), that your working will INCREASE your benefit rate? At times, that can be a small consolation. Let me know if you want me to explain that further.

Expert:  Stephanie O Joy, Esq replied 1 year ago.

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