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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3173
Experience:  IRS licensed Enrolled Agent and tax instructor
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EMC011075 ONLY I like to open a new question relating to my

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EMC011075 ONLY
I like to open a new question relating to my previous question that relates to Social Security Benefits.
The previous question regarding ATM tax Form 1040 line 21 “Other Income in how it could affect this person’s Social Security Benefits; since she is between the age of 62 and 66 in which they could reduce or eliminate her Benefits if there is any earned income, Wage, S/E tax. etc. I ‘m almost 100% certain that Social Security code/poms is clear that this income reported on line 21 is not Earned Income and therefore will not affect her Social Security Benefits. Note: The award on line 21 has nothing do to with wages, Earned Income etc. There is always the exception or something in left field that maybe I do not see and I would like to be 110% correct???
The Social Security Web states:
What income is counted: The Social Security Administration only counts earnings from work, such as wages, salary or self-employment income to determine if your benefits will be reduced. Earning is defined by: Wage you make from your job or your net earnings if you’re self-employed. This includes bonuses, commissions and vacation pay.
Not included as earnings: Pension, Annuities, investment income, Interest, Capital Gain Veterans or other government or military retirement benefits.
Can you take about 5 or 10 minutes by going to this Social Security Benefit (Code/Poms) Link below which is about 2 pages long, and see if there is anything that I might be missing?
Submitted: 2 years ago.
Category: Tax
Expert:  Mark D replied 2 years ago.

Hello, what type of income are you asking if it is considered Earned Income?

Expert:  Mark D replied 2 years ago.

In regards ***** ***** 21 "other income", said income would only be considered Earned Income is subject to Self Employment tax

Expert:  Mark D replied 2 years ago.

For instance, gambling winning or cancellation of debt income would not affect social security benefits, but income from Consulting would

Expert:  Mark D replied 2 years ago.

Keep in mind, any income can increase the cost of medicare premiums

Expert:  emc011075 replied 2 years ago.

Sorry, John. I was checking the link you provided.

Social security administration defines earnings as income you have to work for, a compensation for your time and services, like wages, self-employment income, bonuses, commissions.... Most of the time income reported on line 21 is not earned income, an exception would be some hobby income, for instance.

That being said, unless it is clear from the settlement that part of the payout is for lost wages, than no, the settlement will not jeopardize her social security benefits because is not considered an earned income. Even IRS excludes settlements from calculation of Earned income credit. However, how the social security income will be taxed is a different issue. Because of the income, 85% of her benefits will be subject to income tax.