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I'm drawing early social security with a $16,700 earnings…

Customer Question
I'm drawing early social...

I'm drawing early social security with a $16,700 earnings limit. My earnings are going to be nearly $50000. I don't know it the witholdings that have been deducted from that reduce the income before the earnings penalty

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Not much left to tell,right now my earnings are 44,000 so I have a 50% penalty on 27,000 or 13,500 penalty. do the taxes that have been withheld nearly 9000 in total reduce my income subject to penalty

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I'm also trying to have 9000 of exspenses on those earnings withheld until after 1/1/18 and report them when they are paid

Submitted: 7 months ago.Category: Tax
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11/20/2017
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,132
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

Please give me a few minutes to answer your question.

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago

You are talking about two different things going on here.

First of all, if you collect Social Security before you reach full retirement age (collect early, as you state) you can only earn $16,700 per year. Any income about this results in a reduction of your benefits at a rate of $1 for every $2 that you earn over the $16,700.

In your case, at $50,000, and your social security income is $27,000, you will have to give back 50% of the difference between $50,000 and $16,700, or$33,000, times 50% is $16,650 of your SSI will be taken back from you. SSA will reduce your monthly benefits until you have paid the amount back.

Was any of the $50,000 earned before you started collecting SSI? If so, this income does not count towards the earnings limit.

The withholding on your $50,000 wages is to pay your income tax, and has nothing to do with your SSI, other than if you earn more than a certain level, up to 85% of your SSI can be subject to income tax. This means that the $9,000 of withholding you have already will help to pay the tax on your income.

I hope I have cleared things up. If you have any more please feel free to ask and I will be happy to answer.

Thanks! Have a great week!

Roger

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Customer reply replied 7 months ago
What about the withholding part that is for social security and Medicare? Will my ss be raised because that 16500 penalty is nearly equal to my yearly benefit of 18000. The 50000 does not include my ss benefit for 2027
Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago

Again, these are two different things. The withholding that is happening on your job is for income taxes and it goes to the IRS. The reduction in your SSI is from Social Security. If your annual benefit is $18,000, you will have that reduced by $16,650,so you will receive no checks from the period that they determine that you made too much until it is paid back, which in your case is almost a year.

I usually do not recommend that my clients start collecting SSI as long as they are still working and they are not yet at full retirement age, as anyone who makes a decent paycheck will end up not getting much SSI, and they have taken a reduced benefit.

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 7 months ago

I have not heard back from you. Do you have any more questions?

If not, please don't forget to rate me, as this is how questions are closed.

Thanks!

Roger

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