what is earned income for self employed who receive social security benefits

[cassieaitken1]

I am planning to receive social security benefits and trying to understand what I can early as contractor while receiving these benefits, and what the IRS reports to social security as earned income.

I have spoken to Social Security people and they do not know.  Many times I have tried to speak to one who does.  They claim I have to send some form  to them monthly showing income and I cannot locate info on this anywhere.

I know the threshold is 1950 per month.  Or that x 12 for year.... 

If my net is within the threshold, the Social  Security told me that is irrelevant and there is some forumula the IRS uses that I need to understand?  That does not have to do with my net earned income...  And also some monthly formula?- which makes no sense as one month I have maybe a lot to set up new work, and anotheris less....

Regardless if I am not complicating this with any other moneys... how do I know what my net is monthy and yearly to not go over and if I do go over, how do I know what and when will happen?

Taxes are reported annually, 1099s 1 x year so I don't understand how this all happens also.


Thank you.

[VolvoGirl]

If you only have self-employment income your earned income is the Net Profit on Schedule C line 31 minus 1/2 the SE tax (the amount on Schedule 1 line 15).

How old are you?    There are 2 different things to know about social security. People get them mixed up all the time.   Social Security is saying your SS checks may be REDUCED.   Not if it's taxable or not.

1. Your actual SS checks

If you are over full retirement age your actual ss checks won't be reduced. Otherwise they will actually reduce your payments if you make too much other income in the prior year. See SS FAQ for working after retirement
https://www.ssa.gov/benefits/retirement/planner/whileworking.html

It says…
When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you're self-employed. We include bonuses, commissions, and vacation pay. We don't count pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits.

Special Earnings Limit Rule
https://www.ssa.gov/benefits/retirement/planner/rule.html

See page 5 for the special first year rule
https://www.ssa.gov/pubs/EN-05-10069.pdf

2. Income Tax (even the first year).

For any age up to 85% of Social Security becomes taxable when ALL your other income plus 1/2 your social security reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

Turbo Tax doesn't get involved with how much benefits you can get or how much income you can earn. That isn't part of your tax return. That is just with SS sending you the benefit checks. Your SS benefits can still be taxable.

Social Security doesn't get involved with how much of your SS is taxable. Social Security only is telling you How much can I earn and still get BENEFITS.

[dmertz · Accepted solution]

"If you only have self-employment income your earned income is the Net Profit on Schedule C line 31 minus 1/2 the SE tax (the amount on Schedule 1 line 15)."

That's how net earnings are determined for income-tax purposes  However, for Social Security purposes, net earnings are the amount on Schedule SE line 4c.  Generally that would be 92.35% of net profit.  42 USC § 411(a)(11)

The IRS reports to the Social Security Administration the amount on Schedule SE line 4c.

[Hal_Al]

Q.  What is the earned income limit for self employed who receive social security (SS) benefits?

A. $23,400 per YEAR  (not $1950 per month).  There is no limit for the first year, if you had work part of the year before starting SS.  There is also no limit once you reach  full retirement age, 67 for most people. 

If you are under full retirement age  (FRA) and work while receiving Social Security retirement benefits, your benefits may be reduced if your earnings exceed certain yearly limits. In 2025, the annual earnings limit for those under full retirement age is $23,400. If you earn more than this, $1 will be deducted from your Social Security benefits for every $2 you earn above the limit. When you reach full retirement age, your benefits will no longer be reduced, regardless of your earnings. 

The Full Retirement Age (FRA) for Social Security benefits is based on your birth year.

Full Retirement Age by Birth Year:

• Born 1960 or later: FRA is 67.
• Born 1955-1959: FRA is phased in between 66 and 67, depending on the specific birth year.
• Born 1943-1954: FRA is 66.
• Born before 1943: FRA is phased in between 65 and 66, depending on the specific birth year

[cassieaitken1]

my question is for self employed, what is earned because I was told it is not just net income, there is a different calculation in this situation

[cassieaitken1]

i am asking what the method is to calculate income by the IRS for self employed ....

i was told by social security it is not simply net income 

[cassieaitken1]

how is this earned calculated is my question?  it is not w2 income and I was told there is formula used by the irs

[cassieaitken1]

thank you

[cassieaitken1]

so this number that is reported to social security, is not to exceed the 23,500 for the year if one is 62 and receiving benfits, correct?  to not lose benefits, etc....