Self-Employment and Social Security
Reading Time: 2 MinutesLast Updated: August 29, 2019
Many people enjoy the independence of owning and operating their own small business. If you’re a small business owner, you know that you have additional financial responsibilities when reporting your taxes. A part of this is paying into Social Security.
Most people who pay into Social Security work for an employer. Their employer deducts Social Security taxes from their paycheck, adds a matching contribution, then sends those taxes to the Internal Revenue Service (IRS) and reports the wages to Social Security. Self-employed people must do all these actions and pay their taxes directly to the IRS.
You’re self-employed if you operate a trade, business or profession, either by yourself or as a partner. You report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file.
You must have worked and paid Social Security taxes for a certain length of time to get Social Security benefits. The amount of time you need to work depends on your date of birth, but no one needs more than 10 years of work (40 credits).
In 2019, if your net earnings are $5,440 or more, you earn the yearly maximum of four credits — one credit for each $1,360 of earnings during the year. If your net earnings are less than $5,440, you still may earn credit by using an optional method described below.
We use all your earnings covered by Social Security to figure your Social Security benefit, so, report all earnings up to the maximum, as required by law.
Family members may operate a business together. For example, a husband and a wife may be partners or run a joint venture. If you operate a business together as partners, you should each report your share of the business profits as net earnings on separate self-employment returns (Schedule SE), even if you file a joint income tax return. The partners must decide the amount of net earnings each should report (for example 50 percent and 50 percent).
You can read more about being self-employed and how that affects your Social Security benefits including optional methods of reporting.
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About the Author
Mike Korbey, Deputy Commissioner for Communications
Mike Korbey, Deputy Commissioner for Communications
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JA H.
I took early retirement at 62 and began receiving benefits. But, this year I stopped my benefits because I thought I would earn too much money, therefore receiving zero through October 2019
Now, I have calculated that I will have Sch. C income of $40,000. Does Social Security adjust my self-employment income by 1/2 of the self-employment tax (about $3,000) to arrive at my net self-employment income for determining social security benefits?
L.A.
Hi JA. For your security, we do not have access to your personal information in this forum. Your question is a good question, but a bit too complicated for this forum. For specific questions about your account, please call our toll free number, 1-800-772-1213 (TTY 1-800-325-0778), from Monday through Friday, between 7:00 a.m. and 7:00 p.m. You may also contact your local Social Security office. We also ask members of this forum not to post personal information, as this venue is a public domain and therefore not secured. We hope this helps.
emma j.
Self-employment is necessary for the current generation as the population is growing. I also want to contribute to society and if anyone interested in tech jobs you can contact- https://www.geektech.support/how-to-contact-geek-squad/
Nevia m.
I am on sad and I found a three day job how much is the limit on income frock
A.C.
Hi, Nevia. If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn, starting with the month you reach your full retirement age. However, if you are younger than full retirement age and make more than the yearly earnings limit, this can reduce the number of payments you receive through the year. For 2019, that limit is $17,640. If you applied and received benefits prior to attainment of full retirement age, and work part-time thereafter you will be considered “retired” only if your monthly earnings are $1,470 or less. Also, if your earnings will be over the limit for the year but you will be retired for part of the year, we have a special rule that applies to earnings for one year. Please visit our Retirement Planner: Getting Benefits While Working for more information. If you have specific questions about your situation, please call our toll-free number at 1-800-772-1213 and speak with one of our agents. Representatives are available Monday through Friday, between 7:00 a.m. and 7:00 p.m. We hope this helps.
Alan W.
I will turn 70 this January and am self employed. Next year will I still need to pay into Social Security on the money I make in 2020?
A.C.
Hi, Alan. Thanks for your question. Yes, the Federal Insurance and Self-Employment Contribution Acts (FICA and SECA) require the withholding of taxes from wages of all employed people, as contributions to the Social Security and Medicare programs. To learn more about FICA and SECA, please visit our Frequently Asked Questions. We hope this helps.
Navin R.
I am looking to do get into business. And certainly this is one of the worrying factor being a self employed. The responsibilities increases in terms for the social security.
Thanks for the great insights.
Navin
https://www.questioncage.com/
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Bobbie N.
I recently opened my own grooming business on January 1st of this year 2019. I realized that I would need to get a social security set up. How do I go about having this done.
L.A.
Hi Bobbie. You need to contact the Internal Revenue Service (IRS) for questions about requirements on business taxes. The IRS toll-free number is 1-800-829-1040 or you can visit their website for more information. We hope this helps.
Harvey
Need help
Saurabh T.
When you work as an employee for someone else, that organization or company take care of Social Security, but if you are self-employed then the process is a bit different
One of the cool benefits of Self-employed is – you claim your all deductions on Schedule C, which can make your taxable income substantially lower.
Thanks for writing this Post
Regards
Saurabh
https://techibhai.com