Question for the Money Doctors

Question submitted on Jul 15, 2012.

Question

My question is related to SS benefits at retirement and self employed income. I am not taking any paycheck from my business. I am set up as an LLC. How does this count towards earning credits for SS at retirement? I checked ssa.gov and it shows I had no income for last year so I did not earn any credits. I do work p/t for another company and I earn less than $10000 per year. How will my benefits get calculated?

Answer

Assuming you are doing business as a single member LLC (disregarded entity for tax purposes and filing a Schedule C on your 1040 for your business), your net earnings from the LLC are reported to the Social Security Administration (SSA) when you file your income tax return.  Any earnings greater than $400 would be reported on schedule SE.  You are allowed to accrue up to 4 credits per year.  In 2011, one credit was equal to $1120.00.  Therefore, your part time income from the other company of less than $10,000 should have qualified you to earn the maximum credits if it was at least $4,480.

It is concerning that ssa.gov shows you with no income for the year.  If you filed your federal tax return and if your part-time employer transmitted your W-2, then the income would be reflected on their website.  Individuals who pay SSA taxes have just over 3 years to correct their earnings record if they feel it is in error.  You can contact the administration at 1-800-772-1213 to begin corrective action.

For additional information visit http://www.360financialliteracy.org/