Earnings Limit for Self Employed

Questions & AnswersCategory: Survivor BenefitsEarnings Limit for Self Employed
jancy-45 asked 1 month ago

I lost my job in 2016 at age 60 and I filed for widows benefits. I wanted to wait and draw social security at age 66 but was the unable to pay my bills and had to file early from my deceased husbands benefits.Since losing my job, I am considering starting a 5013c where the corp can receive funds as well as donations for a ministry.My questions are: if I travel and speak and incur expenses but do not draw a pay check or salary thru the corp or at the very least a minimal one ..how does staring a 5013c affect the $25,000 limited amount of income allowed? Let’s say I am drawing18000 a year or 1500 per month …I am only allowed to make an additional 7000 for the year (18000+ 7000= cap of 25000). If I am self employed I understand I cannot work over 45 hours a month in addition to not exceeding 25000? Do the hourly limits still apply if I am the founding President or CEO of this corp or entity if I volunteer my time after 45 hours? does it apply if I work for an employer other than myself? If I only volunteer my time after 45 hours a month, Is this allowable? And if I do not draw an employment check thru this corporation I want to establish but allow the ministry to cover my gas and ministry expenses…is this allowable since I fall under the age 60 early retirement-surviving widows benefits which has a limited lifetime cap for yearly income not to exceed $25,000? With what I am currently drawing per month on Social Security I am currently staying under the limit of $25000 with making money doing odd jobs. I also understand there is a cap of around 16,000 plus that I can make period over my social security amount of 15000 or I have to forfeit social security benefits period.I have had an unfortunate chain of events that have happened which have been very devastating and left me with just barely enough to cover my bills without any money left over for anything else…Any suggestion or advice you can offer would be greatly appreciated…

1 Answers
Devin Carroll answered 1 week ago

Hi,

Here’s my unequivocal advice. Find a CPA that understands this subject.

The earnings limit is fairly easy to understand for individuals who work for W2 wages. For those who are self-employed…there’s another layer of rules.

These rules can trigger the income limitation even if your earnings don’t exceed the cap. Why? In addition to looking at the amount of earnings, the SSA will also look at your ‘Substantial Services’ that you performed

The Social Security Handbook section titled 1807.4-How Is Substantial Services Determined For A Self-Employed Beneficiary?discusses this concept. I’ve included some of the text below.

We determine whether you, as a self-employed beneficiary, perform “substantial services” by the actual service you perform, not by the amount of profit or loss. In applying this test, we consider the following factors:

1) The amount of time you devote to the trade or business. Generally, services of 45 hours or less in a month are not considered substantial. However, as few as 15 hours of service a month could be substantial if, for example, the hours:

a) Involved management of a sizeable business; or

b) Were spent in a highly skilled occupation.

Note: Services of less than 15 hours a month are never considered substantial.

2) The nature of the services;

3) The relationship of the activities performed before retirement to those performed after retirement; and

4) Other circumstances, such as:

a) The amount of capital you invested in the business;

b) The type of business establishment;

c) The presence of a paid manager, partner, or family member who manages the business; and

d) The seasonal nature of the business.

If you go down this road, be sure you do so with the high quality advice of someone who understands this topic intimately.