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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 586
Experience:  10 years experience
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I filed bankruptcy in 2009 and virtually liquidated

Customer Question

I filed bankruptcy in 2009 and virtually liquidated everything I owned. I was unable to find employment for 2 years. But now I have a job earning 45,000 per year and I am still drawing social security. I thought this was the perfect opportunity to build up a savings, however, between the NC Personal Income Tax and the Federal Income tax on the social security + salary, it has taken me back down to zero.
Question: I can get my employer to pay me as a self-employed contract employee. Is this a solution to the exorbitant taxes I will have to pay for 2015 for the coming year 2016?
Question: are there any other ways I could still keep working and avoid the "penalty" of having the social security past 25,000 wages.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

The issue is not of having income - regardless if that is income from wages or from self-employment - but having income will trigger tax liability.

So during "fat" years when your income is relatively larger - you may make contributions into qualified retirement plan and defer tax liability.

So during years with relatively low income you will take distribution to supplement your social security income and will have lower tax liability.
Another issue that a social security may be partly taxable - and that what you meant under the "penalty"

So if you are below your full retirement age - you might better to stop your social security benefits and let them grow.

You may do that up to age 70.