Social Security and Medicare withholding for retired but self employed persons

[skerns002]

I am 79 years old, retired three times and went back to work about five years ago as a self employed insurance agent. I am on Medicare and draw social security. Do I need to pay social security and Medicare withholding taxes?

[xmasbaby0]

Yes you do.   There is no age limit on paying in to Social Security and Medicare.  If you are working, and are self-employed, then you have to pay self-employment tax for Social Security and Medicare.  You can also prepare a Schedule C for your self-employment expenses.

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 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)

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 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.

[Opus 17]

Yes.  Income earned from working is always subject to SE tax, no matter your age.

Depending on your lifetime earning history and your current social security benefit, having SE income after retirement might add enough to your earning history that your benefit will increase, since your benefit is based on your earning history.

[fanfare]

you don't have to pay withholding. because it is optional

Dot it only because you want to and it is helpful to your cash flow.

@skerns002 

[Opus 17]

@fanfare 

What are you talking about?

@skerns002 

as a self-employed person, no matter your age, you are required to file a tax return that includes a schedule C, which reports your business, income and business expenses. If you have net profit from business, that income will flow to your main form 1040 where it is combined with any other taxable income, such as pensions, or Social Security. Your business income also flows to schedule SE and you pay self-employment tax, this is about 15% and is the equivalent of Social Security and Medicare taxes.

You don’t have withholding because you don’t have a W-2. Instead, you are required to pay estimated taxes quarterly. You should estimate your quarterly income and pay estimated quarterly taxes. The estimated taxes are due April 15, June 15, September 15, and January 15. If you owe more than $1000 in income tax when you file your tax return and did not make estimated payments, you will be assessed underpayment penalties and interest even if you pay in full when you file your tax return. 

The idea that paying taxes is optional is a bit off the wall. While it is true that you don’t have withholding, because you are not a W-2 employee, you must make the estimated tax payments or face penalties when you file your tax return. The estimated tax penalties must cover your income tax and your self-employment tax.

[fanfare]

@Opus 17 

the question was on -

"social security and Medicare withholding"

Send Form W4V to Social Security  if you want that.

All the other replies are off topic.

[VolvoGirl]

Yes you can have tax withholding deducted from your Social Security checks OR you can send in quarterly estimated payments to cover the tax on your self employment income.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  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.  

[dmertz]

@fanfare , I think you missed the fact that the question has to do with being self-employed, not about receiving a W-2.  The self employed pay self-employment taxes as part of their tax liability determined on their tax return.  There is no withholding.

[taxlady28]

You pay into social security but social security will also increase your monthly payments to reflect your additional earnings.