Do you qualify to receive social security benefits?

Do You Qualify to Receive Social Security Benefits?

By Tom Copeland. Published with permission.

Family child care providers work very long hours each year and look forward to the day when they can receive Social Security benefits.

But, before you can receive these benefits you must first qualify to receive them.

You must work and pay Social Security taxes for at least ten years before you will quality to receive Social Security benefits.

You don't have to work these years consecutively and they can be a combination of years working as a family child care provider and as an employee for another business.

To pay Social Security taxes you must earn a profit of at least $400 in a year. If you have a business loss or a profit of less than $400, you won't owe Social Security taxes for that year and the year won't count towards the ten-year goal.

In a survey I did for my book Family Child Care Money Management and Retirement Guide 16% of family child care providers did not have a profit large enough to qualify for the work they did in the previous year.

To see if you have qualified to receive Social Security benefits, go to the Social Security website and look up your record of earnings or call 800-772-1213 . If you are age 60 or older you should be receiving an annual statement that will tell you if you do qualify.

If you do earn more than $400 profit, you should be filing IRS Form Schedule SE Self Employment Tax with your annual tax return. This form will calculate the amount you owe in Social Security taxes. The amount is then transferred onto your IRS Form 1040 and added to the federal income taxes you owe. You do not write a separate check to the Social Security office. Check your own past tax records to see that you properly filed IRS Form Schedule SE.

If your profit is slightly below $400 and you have not yet qualified to receive Social Security benefits, it is a good idea to reduce some expenses to show a higher profit and qualify for that year.

It may seem strange to hear me say not to claim a business deduction! Claiming all allowable business deductions is a message I've been preaching for many years. However, making sure you qualify to receive Social Security benefits is one exception to this rule.

Image credit: money.howstuffworks.com

For more information about Social Security, see my book Family Child Care Money Management and Retirement Guide.

Posted by Tom Copeland at 05:44 PM in Money Management & Retirement | Permalink
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