How many people pay into Social Security?

Last week I wrote about how to correct a work record that was missing some employment earnings.

It is important for your personal record to be correctly posted. In addition to helping fund current Social Security benefits, your earnings are used to compute your future retirement amount.

Through W-2 reporting and self-employment tax information, the Social Security Administration works with the earnings information of almost everyone employed in the country.

How many people is this?

The Research, Evaluation and Statistics component of the Social Security Administration released the publication “Earnings and Employment Data for Workers Covered Under Social Security or Medicare, 2012” in June.

From the Preface:

This report presents 2012 earnings and employment data by state and county for persons covered under the Social Security and Medicare programs.

The data show, by sex and age, the number of wage and salary workers and self-employed persons, the amount of their taxable earnings, and the amount they paid in Social Security and Medicare contributions.

From the Highlights section:

Social Security

  • In 2012, 161.7 million workers had earnings taxable under the Social Security program. About 143.0 million had only wages, 11.2 million had only self-employment income, and 7.5 million had both.
  • Social Security taxable earnings totaled $5.712 trillion, which includes earnings up to the taxable maximum of $110,100.
  • Social Security taxes totaled about $708 billion. 

Medicare

  • In 2012, 165.6 million workers had earnings taxable under the Medicare program. About 146.1 million had only wages, 10.9 million had only self-employment income, and 8.6 million had both.
  • Medicare taxable earnings totaled $7.133 trillion.
  • Medicare taxes totaled about $207 billion.

The “Earnings and Employment Data for Workers Covered Under Social Security or Medicare, 2012” publication is available in pdf and html versions.

Earnings&Employment2012

 

Correcting your work record

Q: I work part-time as an employee for a business and receive a W-2 for those wages plus I have separate self-employment earnings that I pay taxes on when filing my taxes each year. Only the W-2 wages appear on my most recent Social Security Statement. Since I have been paying self-employment taxes, shouldn’t they be on my Social Security number earnings history as well? How do I fix this?

A: Most people who pay into Social Security work for an employer. Their employer deducts Social Security taxes from their paycheck, matches that contribution, sends taxes to the Internal Revenue Service (IRS), and reports wages to Social Security. If registered for SSA Business Services, employers can verify employee Social Security numbers online and report W-2 wage information electronically.

Self-employed people must report their earnings and pay their taxes directly to IRS. If self-employed, you report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file.

All employment earnings for a year are usually posted to your personal work record near the end of October of the following year so your total 2014 employment earnings should be posted to your record approximately the end of October 2015. This applies whether or not a person receives monthly Social Security benefits. When already receiving benefits, new earnings are automatically reviewed to see if they will increase the amount.

If earlier years are not correctly posted, your local Social Security office can help correct your record. Evidence generally needed includes proof of the earnings, such as a W-2 and 1099. For self-employment, tax return information including tax form Schedule SE and proof of tax payment is also needed.

If you received your Social Security Statement by mail, know that you can get a copy of it anytime at your convenience by creating a personal, pin and password protected, my Social Security account. More about doing this is at http://www.socialsecurity.gov/myaccount/.

Are SSA amounts based on where you live?

Q: Do Social Security retirement amounts change based on what state you live in?

A: No. Your retirement amount is based on your personal work history over many years and your age when starting benefits, not on where you live. It will not change if you move to a different state.

Your best 35 years of work are key when your retirement benefit is computed. These best 35 years, often including years immediately before retirement but selected from your full work history, are weighted for inflation and used to compute your Social Security retirement amount as if you were full retirement age (FRA). If you do not have 35 years of work, zeros are added in to reach 35 years.

When your full retirement age amount is known, the specific amount for the month you are starting Social Security is determined by reducing or increasing the FRA amount, depending on if you are younger or older than FRA for the month when benefits start. Go to the SSA Retirement Planner section to estimate your own Social Security retirement amount.

Once receiving Social Security benefits, any cost-of-living increase is computed nationally based on changes in a consumer price index from one year to the next, not where you live.

In a related manner, benefits to you if disabled or survivors benefits to your family if you die are also based on your personal work history and not where you live.

Your Social Security work record is based on employer W-2 reports or your Schedule SE tax return if self-employed. Check it for accuracy by creating a personal my Social Security account at http://www.socialsecurity.gov/myaccount/ and viewing your SSA Statement.

Earnings for 2014 will not show on your record until approximately October 2015. It is very important for your future benefits that your work record be accurate. If it has an error, contact your local office to correct it.

Recently change your name?

Recently change your name?

Is your name the same on your W-2 form as on your Social Security number (SSN) card? 

If you need to update your name on your Social Security card, remember that doing so is free. Social Security does not charge a fee for Social Security number actions whether name change, replacement of a lost card or issuing an original number.  

See the Numbers & Cards section at www.socialsecurity.gov for needed evidence and a downloadable application. The direct link is www.socialsecurity.gov/ssnumber. An easy to use decision tree provides instructions.

To protect your personal information and avoid identity theft, you cannot electronically submit the Social Security number application. While a few areas of the country have centralized sites to process SSN card actions, in North Dakota completed applications, with evidence, can be brought or mailed to a local office. Locations for other areas are part of the decision tree instructions in the Numbers & Cards section. 

To speed your request, be sure to read instructions and have needed information available. Local offices routinely see people who do not have what they need. Unfortunately, they must be sent away wasting their time and ours.

It is important that any document submitted as evidence must be an original or a copy certified by the issuing agency. Photocopies you made yourself or that you had notarized cannot be used. State agency addresses if you need a certified copy of a document showing a birth, marriage or divorce within the United States are linked from the website. All documents are returned to you.

SSN cards are mailed from a central location when processing is complete. Allow approximately two weeks to receive your corrected or replacement card.

The name on your card should be the same as reported by your employer so that your wages are correctly shown on your work record. Have your employer correct your payroll record after your SSN card is updated. Employers can verify the SSN of employees and transmit W-2 data with the free SSA Business Services Online at www.socialsecurity.gov/thirdparty/business.html

Warning: Be careful when searching the Internet for Social Security information. Avoid private for-profit websites that charge for services provided free by Social Security, including name changes to your SSN card. Go to www.socialsecurity.gov or www.ssa.gov for accurate information and free services.  

 

 

Is payroll tax withheld if I work and receive Social Security?

Q: I stopped working full-time at the end of 2014 and started Social Security retirement. For the next few months I will work part-time and then retire completely.

Will Social Security payroll tax be held from my paycheck? If yes, will this increase my retirement amount? 

A: Yes, you continue to pay Social Security and Medicare payroll taxes. Your employer will continue doing so too. Everyone working in employment or self-employment covered by Social Security must pay payroll taxes regardless of age or eligibility to Social Security benefits. Current and historical Social Security and Medicare tax rates are shown here. 

If you are younger than full retirement age, remember annual earnings test limits.

Your new earnings would have to be better than the ones already used to compute your retirement amount to increase your monthly retirement amount. While possible, it is doubtful that a few months of part-time work will change your monthly retirement amount since the best 35 years of your working career are used.  

Benefit amounts of everyone receiving Social Security benefits are automatically reviewed when new earnings are posted to their work record even when low earnings are involved. Due to this, your retirement amount will be automatically reviewed once these 2015 earnings appear on your work record. 

Since you worked full-time all of 2014, it is much more likely that your 2014 earnings will increase your retirement amount when automatically reviewed. 

Employers report your earnings to the Social Security Administration as part of the W-2 process. Different employer deadlines apply based on how reporting is completed. Employers have a March 31 deadline if electronically reporting 2014 W-2 information using Social Security Business Services Online (BSO). If reporting by paper, the deadline is the last day of February.

However reported, national posting of all wage information is usually complete in approximately October, with automatic reviews of benefit amounts starting once wage posting is complete. If 2014 earnings increase retirement benefits, you will receive the increase in approximately December 2015, with payment retroactive to January 2015. 

 

Employers – remember SSA Business Services Online

Employers: You can still register for Social Security Business Services Online (BSO) and transmit your 2014 W-2 information electronically.  

Once registered, you can also immediately verify the Social Security number (SSN) of new and existing employees online or overnight, without seeing the paper SSN card, preventing future reporting problems due to having a wrong SSN or name. If an employee name and SSN do not correctly verify, have the employee contact Social Security. 

Firms providing payroll services register once to use BSO for all their clients.

There is no charge to use Social Security Business Services Online.

 Business Service Online details are at www.socialsecurity.gov/thirdparty/business.html. Registration instructions, tutorials and support contacts are in the Employer section. 

Using your SSA Statement

In previous posts, I have encouraged readers to create a personal my Social Security account at www.socialsecurity.gov/myaccount/. Whether or not you now receive Social Security monthly benefits, online services are there for use. To create a my Social Security account, you must be at least 18 years old, have an email address and a United States mailing address. There are no fees to do this. As of September 30, nearly 14.5 million people had opened their free my Social Security account. 

If not yet receiving ongoing benefits, the major tool available is your Social Security Statement.

Many people think only of retirement when Social Security is discussed, but, in fact, the program includes disability and survivors benefits too. Including family member benefits, retirement represents about 70 percent of national Social Security benefits, survivors about 11 percent, and disability about 19 percent.Nationally, about 18.3 percent of the entire United States population, including adults and children of all ages, receive monthly Social Security benefits. 

Of course, retirement is the desired Social Security benefit, but studies show that just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67 and people die at all ages.   

For all of these possibilities, your Social Security Statement is a great family financial planning tool. After creating your my Social Security account, look at your Statement (sample here), especially your earnings record and estimated benefits sections, at least annually. 

Directly from your actual Social Security work record as reported by employers, your earnings record for many years is shown. This is the only place where you can see your personal earnings history. Future Social Security benefits on your record are based on your lifetime earnings. Review your record for accuracy. If there is an error, follow the correction instructions. 

Now look at the estimated benefits section. The Social Security website retirement planning section, contains tools to estimate retirement amounts but disability and survivors estimates, potentially to your children and other family members, are only on your Statement. Useful at all ages and especially for young families with dependent children, these current estimates can be a foundation for your other family financial planning. 

Creating your personal my Social Security account lets you access your Statement whenever desired. Starting for December birthdays, this past September the Social Security Administration resumed periodic mailings of paper Statements. Workers attaining ages 25, 30, 35, 40, 45, 50, 55, and 60 who are not receiving Social Security benefits and who are not registered for a my Social Security account will receive the Statement in the mail about 3 months before their birthday. After age 60, people will receive a Statement every year. The agency expects to send nearly 48 million Statements each year.

 

 

 

Do you work with payroll? Use SSA Business Services Online.

Are you an employer?

Do you work in a human services department?

Do you handle payroll services, whether for one business or many?  

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

Register now, then verify employee Social Security numbers online and be ready to transmit your 2014 W-2 information electronically. As long as you register in time to meet your W-2 reporting deadlines, there is not a firm BSO registration deadline. You have an extended deadline when using this electronic W-2 reporting. Register now and be ready.  

Business Services Online includes two methods 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 www.socialsecurity.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 just one for the business.   

BSO provides two methods to electronically transmit W-2s. Your business can create and transmit a data file from your 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. 

When you hire a new employee, use the Social Security number verification service (SSNVS) as part of your routine payroll process. Doing this avoids having incorrect employee Social Security numbers, saving your business additional work especially if the person is only a temporary hire. With SSNVS, you can immediately verify the SSN of new employees. If there is a verification problem, the new hire should contact Social Security to resolve it.  

SSNVS verifies that the employee name and provided SSN match Social Security records. It does not provide work authorization information. 

Have a question about Business Services Online? Ask.

When do I get credit for my 2013 earnings?

Q: I retired effective January 2014, so my current Social Security payment only reflects earnings through 2012. When will my retirement amount include 2013 wages? What do I need to do to make that happen?  

A: Earnings for 2013 are automatically reviewed for possible increase to your retirement benefits when posted to your work record, approximately by October 2014. You do not need to do anything for this to happen. The automatic review includes employment from wages and self-employment.  

Employers pay estimated taxes to IRS based on wages paid during the year but specific information of how much individual employees earned during a year are only sent to the Social Security Administration with annual W-2’s. Your employer reports earnings to Social Security at about the same time you receive your W-2 form. The employer report is a copy of the W-2.  

Employers of all sizes can register to report W-2 information electronically with Social Security Business Services Online. Incentives exist to encourage electronic W-2 reporting but many still are received by paper, requiring additional handling and processing time.  

W-2 processing for a year is usually completed during the fall of the following year, approximately October. Social Security receives more that 250 million wage reports annually. These are processed by employer report, not by individual employee. If you worked for more than one employer during the year, your total earnings will not be posted to your personal earnings record all at one time. Earnings from each employer will be added to your record when that employer’s report is processed.  

Your 2013 earnings will be automatically reviewed for possible increase to your retirement benefits when posted to your work record. While this review is automatic, it does not mean that benefit amounts will increase a significant amount or even at all. Retirement benefits are based on your best 35 years of employment, with the actual earnings amounts adjusted (indexed) to account for changes in average wages over the years. New earnings would have to replace earnings already used to increase your retirement amount. If 2013 earnings increase benefits, the increase is retroactive to the start of 2014.   

Since Social Security posts W-2 information all during the year, this automatic review might be sooner, especially if the employer reports W-2 data electronically with Social Security Business Services Online, but final reviews are completed when all W-2’s for the preceding year are processed in the fall. 

This review is done automatically every year that new earnings are posted to your work record. You do not need to take any action for this to happen.  See page 9 of “How Work Affects Your Benefits” at http://www.socialsecurity.gov/pubs/EN-05-10069.pdf.

Whether or not receiving monthly benefits, you can check your personal Social Security earnings record by creating your my Social Securityaccount and looking at your SSA Statement. Earnings on the Statement are updated as described above, with earnings for a year posted during the fall of the next.

SSA online services update

As regular readers know, many Social Security activities can be completed online. 

Social Security has available online services whether you do not expect to be receiving Social Security anytime soon, are completing an application to begin SSA benefits, or are already receiving monthly benefits. Online services are available for specific groups, including employers for W-2 wage reporting and verification of employee Social Security numbers.

From the start of Fiscal Year 2014 in October 2013 through April 2014, here are examples of public online use for Social Security activities:

Through my Social Security, with services for people both receiving or not yet receiving benefits:

14,898,898 views of personal Social Security Statements for estimates and to see earnings records

664,649 changes to a current beneficiary mailing address or of direct deposit bank information (electronic fund transfer)

Applications:

Just over 50 percent of retirement and disability applications are now received online.

760,095 Retirement applications

760,825 Disability applications

391,534 Medicare only applications, for people age 65 but not starting SSA retirement

Other online actions:

145,990 requests to replace a Medicare card

128,589 requests to replace Form 1099 for filing taxes (largely during February – March)

Online services are available for you through the Social Security website, www.socialsecurity.gov, anytime at your convenience without calling or visiting an SSA office but those options are available if preferred.

The national SSA toll-free number is 1-800-772-1213 (TTY 1-800-325-0778). Both numbers have representatives Monday – Friday, excluding holidays, between 7:00am – 7:00pm, local time. Automated services are available 24 hours a day at 1-800-772-1213. Appointments can be made for your local office by calling the national numbers.

Local office public hours are usually Monday, Tuesday, Thursday and Friday from 9:00am – 3:00pm with Wednesday hours of 9:00am – noon. Small offices can have different public hours. Learn local office addresses and public hours here.

Did you know? The original Social Security website was launched in May 1994, just over 20 years ago. That first site received about 17,000 visits in its first month.  Now, in 2014, the SSA website averages more than 17 million visits monthly, contains roughly 45,000 pages of information including retirement planning tools and provides online services. Visit it at www.socialsecurity.gov.