By Nicole Tiggemann Tribune News Service
WWR Article Summary (tl;dr) If you run your own business and expect to collect social security down the road, you may want to double check you are doing everything properly at tax time.
Tribune News Service
Many people enjoy the independence of owning and operating their own small business. If you're a small business owner, you know that you have additional financial responsibilities when reporting your taxes.
A part of this is paying into Social Security.
Most people who pay into Social Security work for an employer. Their employer deducts Social Security taxes from their paycheck, adds a matching contribution, then sends those taxes to the Internal Revenue Service (IRS) and reports the wages to Social Security. Self-employed people must do all these actions and pay their taxes directly to the IRS.
You're self-employed if you operate a trade, business or profession, either by yourself or as a partner. 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.
You must have worked and paid Social Security taxes for a certain length of time to get Social Security benefits. The amount of time you need to work depends on your date of birth, but no one needs more than 10 years of work (40 credits).
In 2019, if your net earnings are $5,440 or more, you earn the yearly maximum of four credits, one credit for each $1,360 of earnings during the year. If your net earnings are less than $5,440, you still may earn credit by using an optional method described below.
We use all your earnings covered by Social Security to figure your Social Security benefit, so, report all earnings up to the maximum, as required by law.
Family members may operate a business together. For example, a husband and a wife may be partners or run a joint venture. If you operate a business together as partners, you should each report your share of the business profits as net earnings on separate self-employment returns (Schedule SE), even if you file a joint income tax return. The partners must decide the amount of net earnings each should report (for example 50% and 50 percent).
You can read more about being self-employed and how that affects your Social Security benefits including optional methods of reporting at www.socialsecurity.gov/pubs/EN-05-10022.pdf. ___ ABOUT THE WRITER Nicole Tiggemann, Social Security spokesperson. ___ Distributed by Tribune Content Agency, LLC.