What do I need to do to verify hours for self-employed when retiring prior to full retirement age but under income earned?

[MarkW0807]

What do I need to do to verify hours for self-employed when retiring prior to full retirement age but under income earned?

I am currently self-employed and am considering filing for Social Security 3 years early. I have looked at my SS statement and the difference between now and FRA is not enough, considering longevity in my family. 

How does the IRS track hours if you work part-time in whether it considers if you have retired? Is it just based upon income earned?

[xmasbaby0]

No one is going to track your hours if you work part-time while receiving Social Security.   It goes by your income.

TAX ON SOCIAL SECURITY

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable. 

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2017 that limit was $16,920 —for 2018 it was $17,040—for 2019 it was $17,640— for 2020 it is $18,240; for 2021 it is $18,960,  (For 2022 it will be $19,560) After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2021 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 13 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.  These states offer varying degrees of income exemptions, but four mirror the federal tax schedule: MN, ND,VT, and WV

[Opus 17]

If you have any other income, your social security may be taxed.  This includes investments, IRA withdrawals, and so on, and happens at any age.

If you have income earned from working (either a W-2 job or self-employment) after you declare retirement, and before you reach your full retirement age, your social security benefit will be reduced.  (And then it also might be taxed.)  The IRS or social security administration don't track your hours worked, they go by your W-2 or your schedule SE.  If your income for 2022 is over the limit, your SS benefit for 2023 will be reduced.

https://faq.ssa.gov/en-US/Topic/article/KA-01921

https://www.ssa.gov/pubs/EN-05-10069.pdf

The earned income threshold is  $19560 ($1630/month), and the benefit reduction is 2 for 1.   For example, if you earned $5000 per month from self-employment after declaring retirement in 2022, your 2023 benefit will be reduced by $1685 per month.  (5000-1630=3370/2=1685) 

[NCperson]

@MarkW0807 -  something to consider, if you are suggesting that you expect to live a long time, then why not hold off on taking social security and maintaining the self-employed hours?

The way the social security works is that your payment goes up 4% per year (before any inflations adjustment) ? for every year before your FRA that you decide to defer the taking social security.  From the FRA date until the age of 70, the payment goes up 8% per year (before any inflations adjustment).  From most articles I've read, the 'breakeven point', is somewhere around 78-80 years old.