Must I pay Social Security taxes on my earnings after full retirement age?
If I correctly understand your question, if you are past Full Retirement Age (FRA) and you continue receiving earned income, such as wages, then you must pay Social Security taxes on that income. This is regardless of your age.
Often times, people retire from their old jobs and start a new career, either full-time or part-time. As long as you have an active earning, you will pay a Social Security tax regardless if you’re “retired” or not. The good news is there is no more earning test, thus reduced benefits, once you continue to work after obtaining the full retirement age (depending on your birth year). Moreover, the longer you work the higher benefits you may receive further down the road. The Social Security Administration will check your record every year to see if there is any additional earnings will boost your future benefit. If there is, they will send a letter to inform you of this new benefit amount. Best!
There are two parts to this question as I understand it: Social Security withholdings on earned income and taxation of Social Security benefits.
As is the case with most things in life, it depends. In this case, it depends on which question you're asking. For completeness, I'll cover both.
If you're still working, whether in a self-employed capacity or for an employer, then the answer is a very simple 'yes'. As long as you are working and earning an income, then you'll be required to contribute to Social Security.
For the other side of this question, you may or may not need to pay taxes on your Social Security benefits. This depends on whether or not your Modified Adjusted Gross Income (MAGI) is above a certain threshold that depends on your filing status (i.e. single or married filing jointly, for instance).
Up to 85% of a taxpayer's Social Security benefits may be taxable. This will depend on your MAGI and filing status: above $32,000 and filing jointly, or above $25,000 and filing single, head of household, or filing separately.
To calculate your MAGI,
- Take one-half the total of your Social Security or Railroad Retirement benefits from your SSA-1099 or RRB-1099 (these are reported on Form 1040, line 20a);
- Add earnings from W2s (Form 1040, line 7);
- Add taxable interest from 1099-INTs (Form 1040, line 8a);
- Add ordinary dividends from 1099-DIV (Form 1040, line 9a);
- Add other gains from Form 4797 (Form 1040, line 14);
- Add IRA distributions from 1099-R (Form 1040, line 15b);
- Add taxable pensions from 1099-R (Form 1040, line 16b);
- Add Schedule E income (rental real estate, royalties, partnerships, etc.);
- Add farm income (Form 1040, line 18);
- Add unemployment compensation (Form 1040, line 19)
- Add any other income that is reported on Form 1040, line 21;
In addition to these forms of income, you also need to add back any tax-exempt interest from investments like municipal bonds (reported on Form 1040, line 8b).
Assuming we limit your question to self-employed earnings or earnings from employment, you never can escape the deduction for Social Security taxes and the Medicare tax. They simply live with you forever if you have any form of “earned” income. I hope ths helps and good luck.
Everyone must make applicable Social Security contributions on income, even those working past the full retirement age. Working past full retirement age may increase Social Security benefits in the future, because Social Security contributions continue to be paid in. Continuing to work, however, may lower current benefit payments, if any, taken during the year full retirement age is reached, according to a Social Security Administration limit which changes every year. If full retirement age is reached in July, for instance, the total income earned from January to July must be below the limit or Social Security benefits are lowered by $1 for every $3 of income over the limit, which was $41,400 in 2014. That money is held by the Social Security Administration and repaid incrementally once the taxpayer is no longer working. There are no limits on income earned past the month that full retirement age is reached, when the full benefit amount is paid no matter how much income is earned.
However, taking Social Security benefits while continuing to work may have the unexpected negative consequence of bumping a taxpayer into a higher tax bracket. Most people forget that a certain percentage of Social Security benefits may be taxed – up to 85% – depending on filing status and combined income, including half of Social Security benefits. Some states also tax Social Security benefits. It is possible to have taxes withheld from Social Security benefit payments by filling out IRS Form W-4V or requesting a Voluntary Withholding Request Form online.