JimC <avoc...[at]sbcglobal.net> wrote:

- quote -

I'm in exactly your situation -- retired at age 65,
collecting SS and other pensions, and also working part time
as a university instructor and self-employed as a
consultant. Because I had less than 35 total years of SS
credit, I get a little upward adjustment in my Social
Security every year. Doesn't amount to much, but it's
better than nothing <G> .

And yes, you pay the self-employment tax (equivalent to both
the employer's and employee's shares of Social Security and
Medicare taxes), and you get to deduct half of the
self-employment tax as an adjustment to income. That's kind
of like the employer getting to deduct its share of SS and
Medicare taxes. So you pay both halves, but you get to
deduct the equivalent of the employer's half, just as the
employer would if you were employed by someone else.

If you work as an employee for someone else, you will be
subject to the employee's share of SS and Medicare taxes as
well.

Katie in San Diego

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No further credit for social security taxes after you start
a pension between age 62 to your legal retirement age [66
this year]. The current social security model assumes that a
fraction of taxes will not accrue toward benefits due to
early death, not working long enough, emigration, working
after the base pension, etc. to contain benefit costs. That
could change with private accounts, but unlike to affect
anyone born before 1950.

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JimC wrote:

- quote -

Where a portion = all of it. You're thinking of the
taxability of your Social Security, which depends on your
total income (regardless of whether it was self-employment
income or not). The worksheet to calculate it is in the
1040 instructions; any tax software should be capable of
handling it correctly.

- quote -

Actually, my understanding (from a Social Security speaker
at continuing education) is that your benefits are
recalculated every year, based on your highest 35 years to
date. Whether your benefits increase or not will depend on
whether this year replaces a lower-earning prior year.

- quote -

Just make sure you've got all the business deductions you're
entitled to. The rest is pretty mechanical.

- quote -

It depends on whether you can rely on yourself to put the
information in correctly. The situation you've described is
common enough that any off-the-shelf software should get it
right, assuming appropriate data entry.

Phoebe

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JimC <avocat5[at]sbcglobal.net> writes:

- quote -

Yes -- all of it.

- quote -

The percentage to include is 100%. What did you read that
lead you to believe you didn't have to include your entire
profit in your gross income?

- quote -

Depends. SS benefits are computed based on your 35 top
earnings years. If you have less than 35 years of earnings,
some of the 35 years in the calculation are zeroes. If your
work turns a zero into a positive number or if your work
replaces a small positive number with a larger one, your
benefits will go up. Otherwise your benefits will be
unchanged.

- quote -

There are no special breaks for being a SS recipient.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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JimC <avocat5[at]sbcglobal.net> wrote:

- quote -

You SUBTRACT 1/2 of the self-employment tax from gross
income, not add it. Then, the actual self-employment tax is
calculated on your Schedule C income less this deduction.

Whether or not your benefits will increase depends on your
earnings history. If you earn enough, after starting to
draw your benefits, the monthly amount will be recalculated
and increased.

Unless you do extremely well in your second career, however,
this won't happen. Your historical earnings are adjusted to
current dollars and then the 35 highest years are averaged
to determing the basis for calculation. So, unless you earn
enough for the current income to replace an earlier high
income year, the benefit will not increase.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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I'm retired and receiving Social Security payments along
with taxable 401K withdrawals, pensions, etc. Last year I
decided to do some part-time work as a consultant/attorney
and received additional income of several thousand dollars.
Business expenses related to the part-time work were
minimal. I understand that I'm now required to pay Self
Employment Taxes (about 15% of about 94% of the net
part-time earnings). In addition, I understand that I have
to add at least a portion of the net Self Employment Income
to the total income reported on my personal (joint) income
tax return. I understand that the amount to be added to my
personal income for the year may be reduced by certain
percentages, but I'm not clear on what these percentages are
(50 percent?). - What is the percentage or amount I have to
add to my gross personal income for the year, and where in
the IRS regs should I look for discussions of this matter?

Also, as with most retirees, the Government computed the
payments we receive from Social Security several years ago
when I retired, based on the totals I had paid in at the
time of my retirement. - Now, as it turns out, I will be
paying additional money into the Social Security and
Medicare systems from the income from the part-time work. -
Do I get any benefits from these additional payments into
the SS/medicare system (such as an eventual increase in my
SS checks), or will my additional payments simply amount to
something of a "windfall" for the SS system?

Last, are there any further
deductions/exemptions/limitations I should investigate that
might offset some of the increase in overall taxes, in view
of the circumstances and the fact that I am currently a SS
recipient? Could I rely on one of the advanced Turbotax
programs to compute such a return correctly?

Thanks for any suggestions.

Jim Cate

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