Tag Archives: business

Receive Social Security? Working? Remember your annual earnings report.

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Q: Last year I started Social Security retirement. As it turned out, I did not continue to work part-time although that had been my original plan. Do I need to report that my earnings were less than expected for last year?

A: If younger than full retirement age (FRA) for part of last year, report your 2012 employment earnings to Social Security if your estimated or actual earnings exceeded your 2012 annual earnings test amounts. This applies whether you started Social Security retirement or survivors benefits last year or in a previous year. Earnings test amounts for 2012 are in Social Security publication 05-10077, “What you need to know when you get retirement or survivors benefits” noted below. 

Earnings for the annual earnings test include only your own gross wages from employment and net-income from self-employment.  

Your estimated earnings amount for a year is used to pay benefits during that year. If your 2012 estimate was high, perhaps you are due funds that were withheld. If your estimate was low, perhaps you need to return funds.

For basic reporting requirements, read Social Security publication 05-10077, “What you need to know when you get retirement or survivors benefits” online or available from any SSA office.

To report your 2012 earnings, call the Social Security national toll-free number, 1-800-772-1213 (TTY 1-800-325-0778) or contact your local office.

Working in 2013? Annual earnings test amounts are at http://www.socialsecurity.gov/retire2/whileworking.htm. Provide an estimated earnings amount to Social Security if you receive a SSA retirement or survivors benefit, are younger than full retirement age for at least part of 2013, and expect to earn over the 2013 earnings test level for your age.This estimate will help keep your benefit amount accurate. Your estimate can be changed during the year as needed.

The earnings test does not apply if you receive benefits because you have a disability. In this case, report starting or ending work to Social Security at the time.

 

Special Payments After Retirement

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When you are younger than full retirement age (FRA), the Social Security annual earnings test involves how much you can earn from wages or self-employment in a calendar year without reducing benefits.  

What if you are paid in 2013 for work completed before retiring in 2012? Does this income count towards earnings test limits? Will your 2013 Social Security retirement benefits be reduced due to this 2012 work? 

Termed a “special payment”, money received in 2013 for work done before your 2012 retirement will not normally affect your SSA retirement. Employee income received after retirement is a special payment if the last thing done to earn the payment was completed before stopping work. Examples could include accumulated vacation or sick pay, bonuses and sales commissions. If self-employed, net income received after the first year you retire is a special payment if you performed the services to earn the payment before becoming entitled to receive Social Security. 

Two local occupations often receiving special payment earnings for SSA retirement purposes are insurance salespeople and farmers. Commissions for insurance policies sold before retirement but received after the year of retirement are usually considered special payments. If a farmer fully harvested and stored a crop before or in the month of entitlement to Social Security benefits, and then carried it over for sale in the next year, the income will not affect benefits for the year of sale. 

As always, this is general information. If applicable to you, discuss special payments when filing for retirement. Read Social Security publication 05-10063, “Special Payments After Retirement”, at www.socialsecurity.gov/pubs/10063.html or available from any SSA office.  Annual earnings test information is at www.socialsecurity.gov/retire2/whileworking.htm.

 

What are the 2013 Social Security taxable earnings? How much total FICA tax have I paid?

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Q: What are the maximum Social Security taxable earnings for 2013? How much total FICA tax have I paid?

A: In 2013, the taxable maximum amount of wages or self-employment earnings subject to Social Security (FICA) tax is $113,700. 

When you have wages or self-employment income covered by Social Security, you pay Social Security payroll taxes each year up to a maximum amount set by law. For 2013, you pay Social Security taxes on earnings to $113,700. Medicare taxes are paid on all income. There is no Medicare taxable maximum amount.

When you have more than one job in a year, each of your employers must withhold Social Security taxes on your wages without regard to what the other employers may have withheld, so you may potentially have Social Security taxes withheld that exceed the maximum. You can claim a refund of the overpaid taxes when you file your personal income tax return with the Internal Revenue Service.

The combined tax rate for Social Security and Medicare is 7.65 percent. Of this, the Social Security portion is 6.20 percent on earnings up to the applicable taxable maximum amount. The Medicare portion (HI) is 1.45 percent on all earnings. 

For 2013, covered wage or self-employment tax rates are:

  • Employees — the Social Security tax rate is 6.2 percent on income under $113,700 through the end of 2013. The Medicare tax rate is 1.45 percent of all income;
  • Employers — the Social Security tax rate is 6.2 percent. The Medicate tax rate is 1.45 percent; and
  • Self-employed —the Social Security tax rate is 12.4 percent on income under $113,700 through the end of 2013. The Medicare tax rate is 2.9 percent.

The taxable base amount has changed frequently over the years. Yearly maximum taxable earnings from 1937 to 2013 are at http://www.socialsecurity.gov/planners/maxtax.htm#maxEarnings.

The three components of Social Security are known as OASDI for old-age (retirement), survivors and disability insurance. The Social Security payroll tax paid by employers, employees and the self-employed is divided between the old-age (retirement) / survivors fund and the separate disability fund. Most goes to the retirement / survivors fund.

How much total FICA tax have you paid? This depends on your total earnings and if you have wages or self-employment. You can use the following link, then go to table #2.A4, to estimate how much Social Security payroll tax you have paid since starting to work. 

The Social Security Annual Statistical Supplement, 2012, contains detailed FICA payroll tax information.

  • Table 2.A3 contains the annual maximum taxable earnings and percentages to the different SSA programs and Medicare.
  • Table 2.A4 contains the maximum annual amount of contributions, 1937–2012. Use this to estimate your Social Security payroll tax paid since starting to work.The table shows yearly tax maximums payable for an employee or self-employed person since 1937. Employer amounts are not shown, but equal employee amounts. Medicare taxes are not included past 1994 since there has not been a maximum Medicare amount since then. Note footnotes concerning 2011-2012 tax amounts.

 

 

 

Newest Annual Statistical Supplement now online

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The Annual Statistical Supplement, 2012 just became available online at http://www.ssa.gov/policy/docs/statcomps/supplement/2012/index.html.  

There is a massive amount of interesting information here, not just concerning Social Security retirement (old-age), survivors and disability insurance (OASDI), but also about other programs including Supplemental Security Income (SSI), Medicare, Medicaid, Unemployment Insurance, Workers’ Compensation, Black Lung Benefits, and Veterans’ Disability Benefits. Each Table of Contents topic has a link to that section in html or pdf formats.

Specific information provided depends on the topic. At approximately 528 pages in length, you will find something in the Annual Statistical Supplement, 2012 to interest you. The Supplement includes more than 240 statistical tables of comprehensive data on Social Security and Supplemental Security Income. Using Social Security as an example, topics include:

From the Highlights and Trends section, here are two interesting tidbits for you:  

“About 55.4 million persons received Social Security benefits for December 2011, an increase of 1,372,512 (2.5 percent) since December 2010. Sixty-nine percent were retired workers and their spouses and children, 11 percent were survivors of deceased workers, and 19 percent were disabled workers and their spouses and children.”

“OASDI benefit awards in calendar year 2011 totaled 5,567,020, including 2,577,647 to retired workers, 498,248 to their spouses and children, and 885,713 to survivors of insured workers. Benefits were awarded to 998,979 disabled workers and to 606,433 of their spouses and children.”

Again, more than just Social Security information is in the Annual Statistical Supplement, 2012. Enjoy.

New my Social Security Account Online Services Available

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Today the Social Security Administration announced a big expansion to services available with a my Social Security account. The full press release follows.

Social Security Announces New Online Services Available

with a my Social Security Account

Michael J. Astrue, Commissioner of Social Security, today announced the agency is expanding the services available with a my Social Security account, a personalized online account that people can use beginning in their working years and continuing throughout the time they receive Social Security benefits. More than 60 million Social Security beneficiaries and Supplemental Security Income (SSI) recipients can now access their benefit verification letter, payment history, and earnings record instantly using their online account. Social Security beneficiaries also can change their address and start or change direct deposit information online.

“We are making it even easier for people to do their business with us from the comfort of their home, office, or library,” Commissioner Astrue said. “I encourage people of all ages to take advantage of our award-winning online services and check out the new features available through an online my Social Security account.”

Social Security beneficiaries and SSI recipients with a my Social Security account can go online and get an official benefit verification letter instantly. The benefit verification letter serves as proof of income to secure loans, mortgages and other housing, and state or local benefits. Additionally, people use the letter to prove current Medicare health insurance coverage, retirement or disability status, and age. People can print or save a customized letter. 

Social Security processed nearly nine million requests for benefit verification letters in the past year. This new online service allows people to conduct business with Social Security without having to visit an office or make a phone call, and very often wait for a letter to arrive in the mail. It also will reduce the time spent by employees completing these requests and free them to focus on other workloads.

People age 18 and older can sign up for an account at www.socialsecurity.gov/myaccount. Once there, they must be able to provide information about themselves and answers to questions that only they are likely to know. After completing the secure verification process, people can create a my Social Security account with a unique user name and password to access their information.

People age 18 and older who are not receiving benefits can sign up for a my Social Security account to get a personalized online Social Security Statement. The online Statement provides eligible workers with secure and convenient access to their Social Security earnings and benefit information, and estimates of future benefits they can use to plan for their retirement. In addition, the portal also includes links to information about other online services, such as applications for retirement, disability and Medicare.

“Given our significantly reduced funding, we have to find innovative ways to continue to meet the needs of the American people without compromising service,” said Commissioner Astrue. “These new enhancements will allow us to provide faster service to more people in more places.”

For more information, please go to www.socialsecurity.gov/myaccount.

 

What is the maximum taxable base? Why does it matter?

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What is the maximum taxable base for Social Security? Why does it matter? 

Simply put, the wages and self-employment income of most people are covered by Social Security. Each year, people pay Social Security taxes based on that work up to the maximum amount set by law. This amount is the maximum taxable base. It has changed frequently over the years.  

A person’s best 35 years of earnings are used to compute their Social Security full retirement age (FRA) amount. With each new calendar year, a year of potentially higher earnings becomes available for use. Not only might their actual earnings be higher, but, depending on the maximum taxable base for that year, more earnings could be credited for use in the Social Security computation. 

To illustrate how earnings credited to a Social Security record can change with the taxable base; say a person earned $43,000 in each of 1985, 1986 and 1987. The maximum taxable base in 1985 was $39,600, in 1986 it was $42,000, and in 1987 it was $43,800. Although the amount of earnings in this example stays constant, amounts credited to the persons Social Security record change each year.  

For this example, 1985 earnings were above the maximum base of $39,600. Earnings that year were taxable for Social Security only to the maximum base amount so, for 1985, the worker had $39,600 credited to his or her Social Security record even though earnings were $43,000. Once earnings reached the tax base of $39,600, the person stopped paying Social Security payroll tax. 

For 1986, even though earnings in this example did not change from 1985, due to the higher taxable base, this year the higher earnings of $42,000 were credited to the work record. As before, the person stopped paying Social Security payroll tax once reaching the taxable earnings amount but more earnings became available for future computation of benefits. 

In 1987, for this example, the earnings of $43,000 were below the taxable maximum. The worker paid Social Security tax on all his or her earnings.  Due to the higher taxable base, earnings of $43,000 were credited to the work record. 

Due to changes in maximum taxable earnings, in this example three years of equal earnings became three different amounts credited to the workers Social Security work record, and available for use in determining future Social Security benefits. 

For 2012, the Social Security maximum amount of taxable earnings is $110,100. The maximum amount of taxable earnings for 2013 is $113,700.

Medicare payroll tax does not have a maximum taxable base limit. It continues for all applicable wage and self-employment income during the year even after Social Security tax ends.

 

Employers – You still have time to use BSO for 2012

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Has your business registered to use the free Social Security Business Services Online (BSO) yet?  

As long as you register in time to meet your W-2 reporting deadlines, there is not a firm BSO registration deadline. Allow time for the process as well as how hectic this time of year can be. Register now. 

Several posts during September and October, easily reachable through the Business Services Category on my Areavoices homepage, discussed available BSO services and registration.  

Services include two ways to electronically file W-2s plus the Social Security number verification service (SSNVS), for online verification of employee Social Security numbers.

To use Business Services Online, you or the appropriate people from your firm must register. Registration instructions are at http://www.ssa.gov/employer/ in the Handbooks, Tutorial & Videos section. Registration is not difficult. As one of several security measures, those registering are asked for the business EIN number as well as their own name, Social Security number, and other information. A User ID and PIN is created for each person registering, not one for the business.  

BSO is growing. Of W-2’s for 2011, approximately 185 million (85.5 percent) were online. About 31.8 million (14.5 percent) were paper. Electronic W-2 transmission reduces your business paperwork, and provides you with an additional W-2 processing month. Were your W-2s electronic or paper?

BSO provides two methods to electronically transmit W-2s. Your business can create and transmit a data file from existing payroll software or use a Social Security provided W-2 template (W-2 Online). You can print copies suitable for distribution to employees with the SSA W-2 template.

Think your business is not large enough to use Business Services Online? Think again. For 2011, the average business using the W-2 Online template sent Social Security 5 W-2s.

When used for new employees, the Social Security Number Verification Service (SSNVS) avoids having incorrect employee Social Security numbers, saving your business additional workloads especially if the person was only a temporary hire. In 2011, the SSNVS was used 2.9 million times, with 105.8 million SSNs checked. Did your business make use of it?

 According to the BSO welcome page, beginning December 10, 2012, BSO will begin accepting W-2s and W-3s for Tax Year 2012. 

Has your business registered yet to use the free Social Security Business Services Online. You still can. Register now. Transmit your 2012 W-2s electronically. 

Have Business Services Online questions? Ask.

Is payroll tax withheld for work after retirement?

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Q:  I am retired, age 67, and working the harvest for a farmer. Does he have to take out Social Security tax from my pay even though I receive Social Security? How does this affect me in the future? 

A: Yes. You pay Social Security and Medicare taxes on work or self-employment earnings, regardless of age or whether already receiving Social Security benefits.  

Your new earnings can increase future benefits if they are higher than the earnings in a year already used to compute your retirement amount. If not higher, new wages will not change your existing amount.   

Work records of everyone receiving Social Security benefits are automatically reviewed each year that new earnings are posted to their record.

Employers – you can transmit W-2 data electronically

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Recent posts about the free Social Security Business Services Online (BSO) covered BSO registration and the Social Security Number Verification Service (SSNVS). This BSO series ends today with submitting W-2 information online.  

Firms performing payroll services for multiple employers can register once to use BSO services for all clients. 

In addition to saving your business time and money in reduced handling and paperwork, with electronic W-2 transmission you have more time to provide W-2 information to Social Security. Unlike the paper W-2 deadline at the end of February, if submitting electronically, the deadline for submission to Social Security is March 31 (or on the following workday if this date falls on a Saturday, Sunday or holiday). Employee copies of the Form W-2 still must be given to employees by January 31 (or on the following workday if this date falls on a Saturday, Sunday or holiday).

There are two basic ways to file W-2’s online depending on your payroll system. 

With many commercial payroll software’s, you can create a data file for transmission to the Social Security Administration (SSA). Free SSA BSO software allows an accuracy check of your data before actually uploading the wage file to Social Security.

A second method is to use a provided W-2 template to create a transmission file of up to 50 Forms W-2 at a time. You can print copies suitable for distribution to employees, and additional W-2’s can be completed as needed. No special software is required. 

There is also BSO software for online W-2c’s, if needed. 

During January 2012, the third of three Social Security webinars about Business Services Online described online filing of W-2 and W-3’s. Although some website images have since changed, the basic process remains the same. Other tutorials are in the Handbook, Tutorial & Video section at http://www.ssa.gov/employer/. You might find these useful.

Personal assistance with SSA Business Services Online is available at http://www.ssa.gov/employer/. Note the customer support link at lower right of that page. This is specifically to help with business service online topics, not individual Social Security benefit questions.

SSA Cost-of-Living-Adjustment for 2013 Announced Today

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Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 62 million Americans will increase 1.7 percent in 2013, the Social Security Administration announced today. 

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 56 million Social Security beneficiaries receive in January 2013. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2012. 

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $113,700 from $110,100. Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum. 

Information about Medicare changes for 2013, when announced, will be available at www.Medicare.gov. For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums.   

The Social Security Act provides for how the COLA is calculated. Read more at www.socialsecurity.gov/cola.  

A fact sheet showing the effect of the various automatic adjustments for Social Security and Supplemental Security Income is at http://www.socialsecurity.gov/pressoffice/factsheets/colafacts2013.htm