Monday, April 15, 2013
Hint for self-employed 62-66 on SS
Though lots of people are choosing to take SS at 62, there's a huge lack of information on the subject. I thought I understood the workings beforehand, but the actual mechanism is rather complicated.
During the 62-66 period, SS tries to insure that your total income doesn't drop below 14k. To keep you above this line, SS adjusts the number of payments per year, not the amount of each payment as you might guess.
How do they know what your income will be this year? For ordinary W2 employment, I suppose they use the withholding tax reports from your employer. For self-employment, it looks like they use your 1040ES estimated payments. A few days after I submitted my first 1040ES for the income year of 2013, SS sent a notice telling me when the monthly payments would begin this year.
My royalty income was very small this year, so the quarterly estimate wouldn't have been legally required. I considered skipping it, but now I'm glad I decided to continue the 1040ES routine. Otherwise I would have needed to manually trigger the SS somehow.
So, based on 'experiment', I'd say it's a good idea to keep up the quarterly estimated payments whether required or not.
¶ 4:18 AM 
