How does Social Security credit points work if you are both employed(receive W-2) and self-employed (sell on eBay, receive 1099-K)?
Do you just add up the payroll taxes you paid as employee and self-employed to figure out how much social security you expect to receive after retirement?
from your paychecks 1.45% is subtracted for compensation subject to medicrare. for net self employment income 92.35% is subject to 2.9% medicare taxes. in addition , taxpayers who make over $200,000 as individuals or $250,000 for married couples are subject to an additional 0.9 percent tax on Medicare wages and net self-employmen t income.
for wages and tips subject to social security taxes reported on w-2s up to 6.2% is taken from your paychecks on up to maximum of $147,000 for 2022. this $147,000 is reduced by the amounts in box 3 and 7 of w-2s. if they exceed this amount none of your self-employment income is subject to social security taxes. if not, then the remaining balance or 92.35% of net-self-employment income, whichever is less, is subject to 12.4% social security taxes. 1/2 of self employment taxes is a deduction to adjusted gross income.
schedule 1040-SE is used to compute these taxes.
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You can get information from Social Security as to how much your future benefits may/will be. There are a number of factors involved including how much you paid into the system and at what age you decide to start receiving benefits.
If you have both W2 and self employment income........
You pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire.
The SE tax includes what you already paid in from your W2s so your schedule SE tax will only be the difference up to the max amount of $9,114.00 for social security. The max income for social security for 2022 is $147,000 between W2 wages and the schedule C Net Profit. If you also have W2 income, you have to break out the Social Security and Medicare taxes. Only the Social Security part maxes out.
For 2022 the max for Social Security is $9,114.00 on $147,000 of wages (147,000 x 6.2%).
Medicare is 2.9% (both er & ee parts) of all wages & 92.35% Schedule C Net Profit - no max.