Q. An individual I do know has not filed tax returns for greater than 20 years as a result of she doesn’t have an everyday job. She will get odd jobs — simply sufficient to feed herself. However now she desires to start out paying earnings tax so she will be able to set up Social Security when she will get previous. How can she begin?
— A pal
A. Your pal ought to work with a professional tax preparer to look at her historical past and decide whether or not or not she ought to have filed tax returns over time.
Notice that even when she’s solely carried out odd jobs, the IRS says all earnings must be reported. Particularly, it says it contains “money earned from aspect jobs, barter exchanges of products or providers, awards, prizes, contest winnings and playing proceeds.”
When she meets with a tax skilled, she might want to deal with whether or not she’s been self-employed for tax functions or if she’s an worker of another person, stated Michael Maye, an authorized monetary planner and licensed public accountant with MJM Monetary in Gillette.
“This will get to her purpose of paying in in the direction of Social Security, together with Medicare,” Maye stated.
If she is self-employed, she can be paying tax as each the employer and the worker, in comparison with if she was employed by another person, by which case the employer would pay the employer a part of payroll tax, he stated.
“For W-2 workers, Social Security is withheld from their wages whereas self-employed people pay their Social Security taxes once they file their earnings tax return,” Maye stated.
Additionally, to be eligible to gather Social Security down the street, a person should even have 40 Social Security. In 2022, a person receives one credit score for every $1,510 of earnings as much as a most of 4 credit per 12 months, Maye stated.
He additionally famous the variety of credit for a person unable to work resulting from vital well being points may be a lot decrease.
In case your pal was ever married, even when she’s now divorced, she could also be entitled to a spousal Social Security advantages even when she doesn’t qualify below her personal earnings report, Maye stated.
Lastly, he recommends she go to the My Social Security web site to ascertain an account to see whether or not she has already earned any credit primarily based on her previous work.
E-mail your inquiries to [email protected].
Karin Worth Mueller writes the Bamboozled column for NJ Advance Media and is the founding father of NJMoneyHelp.com. Comply with NJMoneyHelp on Twitter @NJMoneyHelp. Discover NJMoneyHelp on Fb. Join NJMoneyHelp.com’s weekly e-newsletter.