HW "Skip" Weldon wrote:

- quote -

I agree, this is an open question. Have you tried asking SSA with
a very specific question, ie: W-2 Box 1 amount is $11,700, Box 3
amount is $13,000, Box 12 amount is $1,300, code "D" - is this
person subject to a benefit disallowance???

MTW

On 10 Jun 2005 14:50:01 GMT, "MTW" <mtwingcpa[at]yahoo.com> wrote:


- quote -

Well I had seen it before as well, but always in the context of a
beneficiary receiving SS benefits and at the same time having to pay
SS tax on current earned income. I always excused it by saying that
changes in SS earnings occasion a recalc of SS (I always thought it
was annually)... but I had never connected this recalc to the earnings
limitation. Live and learn.

Still looking for a definition of "wages" as it pertains to the SS
earned income exclusion. Suspect it is the number on Line 7 of 1040,
but have no basis for that belief.


-HW "Skip" Weldon
Columbia, SC

HW "Skip" Weldon wrote:

- quote -

Encountered people subject to the benefit disallowance? I've seen
it fairly often in my practice. People are in a big hurry to
start collecting benefits at age 62, but then get an employment
offer that they can't refuse.

And it does appear that benefits are recalculated after age 65 to
take into account both the additional earnings record and the
disallowed amounts. However, I've never run the math to see
if/when a break-even occurred.

MTW

On Mon, 6 Jun 2005 19:29:44 CST, "Charlie K" <Chas_K[at]excite.comwrote:

- quote -

In looking into this, I came across a notation on the AARP web site
that said the following,

"While the earnings limit is perceived as a tax, individuals will
eventually recapture all of their earnings limit benefit reductions
once they reach normal retirement age, and if they live long enough.
Benefit recapture is accomplished by recomputing the monthly benefit
when the beneficiary reaches normal retirement age. The period
required for full recapture of benefits is computed actuarially.

Because benefits are recaptured, it has been argued that the earnings
limit functions like a program of enforced savings, although whether
this forced saving is efficient has been debated. It may be
inequitable to certain racial or income groups that tend to have
shorter lifespans. (Gruber and Orszag, 1999) "

With people retiring earlier and continuing to earn some income, we're
likely to bump into this more often. Has anyone encountered this
before?




-HW "Skip" Weldon
Columbia, SC

On Wed, 8 Jun 2005 14:57:04 CST, "Elizabeth Richardson"
<erichktn[at]worldnet.att.net> wrote:


- quote -

You are right. Back to the drawing board I go.


-HW "Skip" Weldon
Columbia, SC

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
news:ck8ea1de1sas7o1nm0id75kfhthnnkv7he[at]4ax.com...
- quote -

In that case, a 401k, 457, etc. wouldn't reduce the income for SS tax
purposes.

Elizabeth Richardson

On Mon, 6 Jun 2005 19:29:44 CST, "Charlie K" <Chas_K[at]excite.comwrote:

- quote -

Thanks. This forced me to do a little research, and it seems as
though Social Security "wages" is defined the same for both SS
taxes/contribution and the SS earned income limit.

So we can say that if the income is subject to SS tax it is included
for purposes of the earnings limit - for both employees and
self-employeds.

This essentially is what Charlie K is saying. Anybody disagree?

-HW "Skip" Weldon
Columbia, SC

If you look at the instructions to the 1040, you're directed to use
line 7 of the form which is wages, plus most all the rest of the income
lines. You aren't allowed to use the deductions for adjusted gross
income such as the deductible IRA. So I say you have to reduce line 7,
which would be 401k, 457, Flexible Spending Accounts etc.

It's been a while since I saw this and am too darned lazy to look it
up. Here's the deal. Person age 63 started SS benefits and then was
called back to work. Looks like he will slightly exceed the earned
income limits.

Obviously any compensation paid by the employer counts towards this
limit. What about 401k - would that reduce the income subject to the
limit? Would traditional IRA help? Anything else commonly used to
help with this?


-HW "Skip" Weldon
Columbia, SC