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• Hello Carol,
Was married to ex spouse for 16 years and that was 23 years ago. I am now almost 66 years old and have applied for ex spouse half payment for social security

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• I turned 62 in February of 2012, and am retiring August 15, 2012. I am a sole propietor of an LLC
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I think I understand the social security admin regulations from your other
answers but wanted to go over the spec

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• I turn 62 in a few months.. I have been self employed builder for 30 years and my pay in has been low..I have not worked in
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Last Update : 05-17-2012 

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Social Security Question:

Hi Carol, I have a social security question - payment information is below from paypal.

I have a friend that is 63, will

Social Security Answer:

Hi Carol, I have a social security question - payment information is below from paypal. I have a friend that is 63, will be 64 in a couple of months. He applied for social security in April because he does not intend to retire when he gets to be 65, and wanted the extra income. Here is the question: He is running a business as a sole owner making leather goods and earns more than the earnings limit for social security. However, once he takes all of his expenses off for the business he is under the limit. He also takes no salary, and just lives off of some of the cash that comes into the business. Does social security calculate what the bottom line business profit is at the end of the year when taxes are done, or is the gross business profit counted, or is it not counted at all because he is not taking a salary, and leaving the credit card transactions and checks that are deposited in the business account, and using them to pay for leather expenses? What are the reporting requirements for social security? Does he just file a tax return at the end of the year and claim the social security and then the business income as well? Also, is social security income taxable (separate question). Thank you.

Support Replied ~ 05-17-2012 17:13:31

Dear Lisa; When someone is self-employed, Social Security looks at the net gain (the amount of money that one pays taxes on) which is on line 4 of the schedule SE. They will look at the earnings posted for the last 3 years and use that amount for an estimate of what will be earned in the present year. If that amount is less than the $14600 allowed by SS, then he will get all his social security checks. If it is more, than they will hold $1 for every $2 he plans to earn over that amount. At the end of the year when he knows what his net gain will be, he will report it to Social Security and they will pay him back for any monies that they held that should have been paid to him. They can only hold entire check amounts, so if he needed to have 3 1/2 checks held to cover current earnings, they would hold 4 checks and pay him back the 1/2 check after he reports his wages to IRS. He should do an annual report with Social Security as well as his taxes. The annual report with Social Security is due by April 15th of each year. No annual report is due if he does not go over the amount allowed by SS. Social Security income is taxed based on one's income reported on the tax form and is in the IRS formula on the 1040. Supposedly only 10% of the people are taxed on their SS. Also, if he should sell the business, then his Social Security will come immediately.....Hope this helped you.....Carol
Your Comment ~ 05-17-2012 17:19:54

Hi Carol, He has not reported any of this business income in the last decade because his brother was running the business but recently because of health could no longer do it, so he has had no income from the business until April of this year, when he filed for social security and took over the business. Does that change things?

Support Replied ~ 05-18-2012 12:06:50

Dear Lisa: Yes it does change the situation. He should report to Social Security that he is now the owner of a business and give them an estimate of what the net gain for the business will be....It would be helpful if he had the tax returns for the business from the last 3 years so that they can get an idea of what this company can earn. He would not be in this business if there was no gain so he has to explain the situation to Social Security because he has come out of the retirement that he stated on his application. Self employment is tricky and he could accrue an overpayment and penalty if he doesn't report his return to work. It is important that he reports this change......Carol
Your Comment ~ 05-18-2012 13:08:17

So are you saying that it is not liking getting a part-time job and just not earning over $14,400? I thought that if the business earns around $10,000 a year, which is what is anticipated, that he will not have a problem, but from your last email it sounds like there is something else that he needs to do. Is that what people do when they have a part-time job and also draw social security? Also, I have another question on a different subject related to me. You gave me some great answers earlier in February about a situation that I have as a widow. If you want me to pay another fee, I will - just let me know. My question is this: I was divorced and now my ex is dead, so I intend to draw on his social security at 60. And I understand that I am also limited with the earnings cap at the $14K. My question is this: I have a retirement pension that I can draw from my job when I retire at 60 that is about $700 a month. I need that to retire. Will that count toward the $14K cap, or can I still work and earn up to $14K? Also, my employer will entertain the idea of decreasing my salary to below $14K, but paying my health insurance premium, and car allowances. Does that count toward income with SS? Thanks for your help, and if I need to pay another fee, please let me know. Your answers are great!

Support Replied ~ 05-20-2012 20:58:04

Dear Lisa: elf employment is not like working for an employer. With self employment one can control their income because they are their own boss. So Social Security has a whole set of rules for income derived from self employment. They will take the net gain and divide by the number of months that he owned the business to figure out if he went over the monthly amount....He really needs to contact them..... As for your situation, the other pension will not count as earnings....what Social Security counts is what is reported on a W2. Ask your employer what is going on your earnings statement and that is what will be considered as earnings. I have a feeling that the car allowances and health insurance payments might show up on your W2. But the private pension will not count.....Good Luck.......Carol

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DISCLAIMER - You should consult with your local Social Security Office before acting upon any information received as a response to your question on "Social Security Advisor".

"Social Security Advisor" is intended to provide accurate and authoritative information with regard to the subject matter covered. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting, investment or other professional advice or services.

Information obtained from, including e-mail responses from "Social Security Advisor" should be considered as general educational information. You must never rely upon the advice given here. Your individual situation may not fit the generalizations discussed. Only your local Social Security office can evaluate your individual situation and give you advice.

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In the news: Read Carols comments in this Social Security article

Thank you so much. The amount of infomation you provided on our call went a long way in helping to resolve the issues I had with the social security rep I was working with.
Tom F. 04-22-2020

Thank you so much. You provide a fantastic service and I really appreciate all your help. The next time I have a question regarding Social Security I will go to you first and save myself a lot of time.
Carol J. 04-10-2020

Thanks for the straight forward answers. It would have save a lot of time if I knew about this site months ago.
Emily D. 03-30-2020

Great talking with you and thanks for the help. Things now seem to be going in the right direction.
Chris H. 03-30-2020

Hello, thank you so much for responding to my inquiry, I really did not expect to get an answer from you so quickly. Brought the information you sent to my social security office an the issue, i have been dealing with for months, was resolved in an hour.
Veda M. 03-10-2020

Thank you so much for the reply.
Tom C. 02-09-2020

Thank you so much for returning my email so quickly.
Laverne J. 01-30-2020

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