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What's Best for Mom in a Mom-and-Pop Business?
Q: My wife and I are in our 30s. We're partners in a business that nets us about $80,000 per year. What's the best way to report our income on our tax returns to maximize our Social Security benefits?
A: Even though you're asking about your future …Read more.
Bleeding Hearts and Bootstraps
Q: I was surprised by the woman who wrote to you and said that people living on a small amount of Social Security were just lazy. Let me share my story to help this callous woman understand why people like me don't get very much from Social Security.…Read more.
Don't Base Critical Decisions on Prophets of Doom
Q: I'm about to turn 66. I want to put off starting my Social Security until age 70 because if I do, I'll get an extra $600 or so per month in a delayed retirement bonus added to by Social Security checks. But my husband said I should take my Social …Read more.
Geezers and Floozies
Q: I'm part of a group of old geezers who gets together every week at the local coffee place. Social Security is a frequent topic of conversation. At our last meeting, the subject of benefits for divorcees came up.
One of our geezers was married to …Read more.
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Social Security May Give You the BusinessQ: I am 62 years old and thinking of signing up for Social Security. I run my own business and am planning to turn it over to my wife. She is only 50 years old, so Social Security isn't an issue for her yet. But I'd like to stay involved in my company. I understand I can pay myself up to $14,160 per year and still qualify for all my Social Security benefits. Is this right? A: The easy answer to your question is that, yes, you can make up to $14,160 per year and still qualify for all of your Social Security benefits. But I think you're going to learn that getting those benefits won't be so easy. And that's because you run your own business. You're going to have to jump over a few more hurdles to prove to the Social Security Administration that you will not be too involved in your company. To explain why that's an issue, I have to start with this basic Social Security premise: You must be retired to be eligible for retirement benefits. But over the years, lawmakers have liberalized that rule. First, by setting income thresholds (that's the $14,160 limit mentioned above) that allow people to work part time and still be eligible for Social Security. Second, by changing the law to allow people over their "full retirement age" (currently age 66) to work, earn as much as they want and collect Social Security benefits at the same time. Frankly, I wish they had extended that unlimited income policy to all Social Security beneficiaries. Then we wouldn't have the convoluted earnings penalty rules we have today, and I wouldn't have to spend an entire column explaining why self-employed business owners under full retirement age might not qualify for Social Security. But wishful thinking aside, let's get back to the way things are, which forces the Social Security Administration to question your retirement status. That's essentially because you are in a position to control your earnings. When a person who works for wages applies for Social Security benefits and says he or she is going to make less than $14,160 per year, it's easy to verify that allegation. A quick check of pay stubs or a W-2 form provides all the evidence that's needed to show the worker is earning less than the legal income threshold. But it's not so cut and dried for a self-employed business owner like you.
Also, you said you would be paying yourself $14,160. If you are legitimately reducing your involvement in the business to the point where you are actually performing services worth $14,160, that's one thing. But if you are paying yourself that amount of money simply to stay under the Social Security earnings limit while you continue to run and manage the business, then once again, you will not be considered "retired" and will not be eligible for Social Security benefits. Here's a true story that might help illustrate what I'm talking about. In the early part of my career with SSA, one of my jobs was to investigate business owners who were alleging retirement. One case involved a man who owned a furniture store. When he turned 62 and applied for Social Security, he told us that he was turning the business over to his son. I spent about a week, off and on, watching his business. The alleged "retiree" showed up at the store every day and spent the entire day at the store. I observed him helping customers and sitting in an office doing bookwork. When he was called back into the Social Security office to explain his actions, he said he just went there every day to visit his friends and greet the customers. But after further investigation, he was essentially still running the business, which caused his claim for retirement benefits to be denied. My point is this: If you are really turning the business over to your wife and are really going to be doing work that's worth $14,160 or less, then you will be "retired" and eligible for Social Security benefits. It's just that you will have to prove those allegations to the folks at the Social Security office. And don't be surprised if you see a government car parked outside your business for a few days after you apply for Social Security! If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau@comcast.net. To find out more about Tom Margenau and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2010 CREATORS.COM.
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