Social Security and Self-Employment

By Deborah Banikowski
District Manager, Syracuse

If you are not self-employed, Social Security taxes are typically taken out of your paycheck automatically. You and your employer each pay a 6.2 percent Social Security tax on up to $132,900 of your earnings and a 1.45 percent Medicare tax on all earnings in 2019. You don’t have to do anything extra for the coverage you will one day receive because your employers handle the deduction as well as matching that contribution. Then they send the taxes to the Internal Revenue Service (IRS) and report your wages to Social Security.

If you’re self-employed, the process is a little different. You report your earnings for Social Security and pay your taxes directly to the IRS when you file your federal income tax return. You pay the combined employee and employer amount, which is a 12.4 percent Social Security tax on up to $132,900 of your net earnings and a 2.9 percent Medicare tax on your entire net earnings in 2019. You are considered self-employed if you operate a trade, business or profession, either by yourself or as a partner. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to other tax forms you must file.

Net earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. Some income doesn’t count for Social Security and shouldn’t be included in figuring your net earnings.

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.

You can read more about self-employment and Social Security at www.socialsecurity.gov/pubs/EN-05-10022.pdf.


Q&A

Q:  I worked for the last 10 years and I now have my 40 credits. Does this mean that I get the maximum Social Security retirement benefit?

A:  Probably not. The 40 credits are the minimum number you need to qualify for retirement benefits. However, we do not base your benefit amount on those credits; it’s based on your earnings over a lifetime of work. To learn more about how you earn Social Security credits and how they work, read or listen to our publication “How You Earn Credits,” available at www.socialsecurity.gov/pubs.

Q:  I recently applied for a replacement Social Security card, but I might be moving before it arrives in the mail. What should I do if I move before I get it?

A:  Once we have verified all your documents and processed your application, it takes approximately 10 to 14 days to receive your replacement Social Security card. If you move after applying for your new card, notify the post office of your change of address and the post office will forward your card to your new address. If you do not receive your card, please contact your local Social Security office. To get a replacement, you will have to resubmit your evidence of identity and U.S. citizenship, or your lawful immigration status and authority to work.

Q:  Someone stole my Social Security number, and it’s being used repeatedly. Does Social Security issue new Social Security numbers to victims of repeated identity theft?

A:  Identity theft is one of the fastest growing crimes in America, so you aren’t alone. If you’ve done all you can to identify and fix the problem, including contacting the Federal Trade Commission (FTC), but someone is still using your number, Social Security may assign you a new number. If you decide to apply for a new number, you’ll need to prove your identity, age, and U.S. citizenship or immigration status. You’ll also need to provide evidence you’re having ongoing problems because of the misuse of your current Social Security number. You can read more about identity theft at www.socialsecurity.gov/pubs.

Q:  I was speaking with my sister and she told me that she receives half of her spouse’s benefit. Why am I not eligible for benefits from my spouse?

A:  If your spouse is eligible for Social Security benefits, you could be eligible for one-half of their benefit at your full retirement age. However, if you worked and are eligible for Social Security benefits on your own record, your own benefit may be higher than what you could be eligible for on your spouse’s record. If you have questions regarding your eligibility for benefits, please call 1-800-772-1213 (TTY 1-800-325-0778) between 7 a.m. and 7 p.m. Monday through Friday.

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