Baby sitting income while on social security

[stech]

I get social security income and in Medicare benefits. I also started baby sitting. If I get income over $40K, will I loose my Medicare status or social security income? I haven’t filed my return in few yrs, because I’m not required to file. (no taxable income). Will this change after my baby sitting income?

[xmasbaby0]

You have not mentioned your age.   You did mention Medicare--so can we assume you are at least 65?   If you are deemed "full retirement age" your Social Security is not affected by receiving other income.   If you are below full retirement age then if you earn over a certain amount, your SS benefits can be affected.

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 2019 it was $17,640— for 2020 it was $18,240; for 2021 it was  $18,960.  For 2022 it was  $19,560  —  for 2023 $21,240)

No, your Medicare would not be affected by earning income while receiving 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. 

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.  If you work as an independent contractor then you will pay self-employment tax for Social Security and Medicare.

Many babysitters must report self-employment income---so you must consider that if you babysit in your own home.   If you work in the home of the child(ren) that you babysit, then you may be a "household employee" for whom the employers are required to issue a W-2 and withhold tax and Social Security and Medicare.   So we need more information about your plans and how you will babysit.   And... is the babysitting for your own grandchildren--- or someone else's children?   That also comes into play.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2022 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 11 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont  These states offer varying degrees of income exemptions, but two mirror the federal tax schedule: MN and VT.

[stech]

Sorry, forgot to mention she. I’m 69 and taking care of grandchildren. I wanted

verify, if I get paid will I lose my health care (Medicare), social security income or any other benefits I’m getting. It seem like won’t? Is there a limit? Like if I get $100k. I know household employer (son) would have to pay taxes etc. 

is this possible to get one lump sum pay at year end? Or do they have to pay me monthly?

[xmasbaby0]

@stech You are past "full retirement age" so your Social Security benefit amount cannot be reduced by the babysitting income.    You have not explained whether you will babysit in your own home or the home of your grandchild.   It does make a difference as to how the income is reported so please clarify that for us.   

If you are going to babysit in YOUR own home, you are receiving self-employment income which must be reported as self-employment income.  You will pay self-employment tax, and might need to pay estimated quarterly payments for that income.    If you babysit in your grandchild's home, then you can be a W-2 employee and they can report your income on a W-2 and call you a household employee.  But since you are the child's grandparent there is an exception made and they do not have to withhold FICA from your wages.   However they should withhold ordinary federal (and maybe state) income tax from your pay.

[stech]

I usually baby at my house and sometimes at their home. Since it’s family, I am ok with picking easy option for taxes. They did pay me by check. No taxes withhold. Can I be just 1099?

Also this is for 2022 taxes. 

[xmasbaby0]

If your self-employment income was only from cash, personal checks, credit card payments, or cryptocurrency 

Type Schedule C in the Search box and then select the Jump to link. This will take you to where you can enter any cash, personal checks, credit card payments, or cryptocurrency (Form 1099-K) related to your self-employment. You may first be asked some general questions about your business. After you answer them, you’ll be taken to the Let's get income for (your line of work) screen where you can enter this income as Additional Income.

[Opus 17]

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@stech wrote:

I usually baby at my house and sometimes at their home. Since it’s family, I am ok with picking easy option for taxes. They did pay me by check. No taxes withhold. Can I be just 1099?

Also this is for 2022 taxes. 

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Let me summarize some main points including two or three that (I think) were missed.

1. If you are self-employed, you file a schedule C as part of your tax return.  You won't get a 1099, because only businesses issue 1099s to their contractors.  You are required to report your income and expenses from your own accurate records even if you don't get tax paperwork.  You will pay income tax and self-employment tax on your net profits.

2. You report your gross income and you can subtract certain ordinary and necessary expenses of the business.  That can including buying toys, protective equipment for corners, cabinets, etc., and money you spend on diapers or snacks.  If you provide care in your home (using your home for business) you can include certain household expenses as deductible business expenses, including a percentage of your rent or mortgage, utilities, and insurance.  Make sure to keep accurate records.  The more expenses you can prove, the more you can reduce your net taxable income.  See here for more information.

https://www.irs.gov/forms-pubs/about-publication-587

3. Since you are past your full retirement age, working will not reduce your social security benefit.  And in fact, paying self-employment tax (the equivalent of social security tax) may increase your future retirement benefit, depending on your earnings history.

4. If social security is your only income, it is tax-free.  However, if you start making other income, you may be required to pay income tax on a portion of your social security as well.  For starters, if you are single, and half your social security plus all your other income is more than $25,000, then you will start to pay income tax on a portion of your social security as well as paying tax on the other income.   The overall formula is complicated, and depends on your total income (social security, babysitting, any pension, IRA, etc) so I can't really go into specific detail.  There are some calculators on the web that can help you estimate the total tax you will owe. 

5. You can't lose Medicare coverage, but if your income is very high, the government will increase your premium.  This is called Income-Related Monthly Adjustment Amount or IRMAA.  This starts at an income of $97,000 for 2023 if you are single, higher if married. The limits and adjustments are here, although it sounds like you probably won't be close to the IRMAA limits. 

https://thefinancebuff.com/medicare-irmaa-income-brackets.html

6. You will need to make estimated tax payments 4 times a year, to account for the self-employment tax, income tax on your net earnings, and income tax on your social security (unless you have tax withheld from social security.  The time table is this:

Income earned	Estimated payment due
January 1-March 31	April 15
April 1-May 31	June 15
June 1-August 31	Sept 15
Sept 1-December 31	Jan 15

If you don't make estimated payments, you can be assessed a penalty, even if you pay in full at tax time.  Depending on your expected total income, estimated payments of 20%-30% will probably cover you.  For more accurate estimates there are various tax calculators online.  The IRS has one here,

https://www.irs.gov/individuals/tax-withholding-estimator

And Turbotax has one here.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

https://turbotax.intuit.com/tax-tools/calculators/self-employed/