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Medicare credits and self employment

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steffb503

Member
Hoping someone can help me. Both my husband and I are self employed. We have rental units and we have a dairy farm. We live in NY.
My husband just turned 65 and has been told he does not have enough credits for medicare or SS. He is short 11 credits.
Because our rental units are on the same property as our farm and house we deduct a portion of our property taxes along with all the expenses of running both the farm and rentals.
Our total income for 2019 was approx $19,000.00 and because of that we owe little to nothing in taxes. Also there are normally no payments paid to Social Security or Medicare. SS tells me that you earn 1 credit for every $1360.00 you earn, so why not our earnings? I know when I filed our taxes for the past 20 years I have been asked if this income is exempt from Social Security, because of the farming. I always claim it is subject to the tax. Now I find out he never earned those credits.
So my husband can work for 4 more years, claim zero in expenses and pay taxes on that income to earn the credits needed. How can I be sure the credits get applied?
 


Taxing Matters

Overtaxed Member
There are a couple of things to know here.

First, what gives you credit towards FICA taxes (Social Security, Medicare, and Medicaid taxes) are the wages on which FICA taxes are withheld and the net earnings from self employment on which self employment (SE) tax is paid. For self-employment, the net earnings are the bottom line of Schedule C that is then carried over to Schedule SE. Schedule SE is where you compute the actual amount of SE tax. What this means is that it is not your income tax that matters here — on $19,000 of income you would have very little or no income tax to pay for a married couple — but what the net income from the self-employment was. While the dairy farm income would be self-employment income, it is likely that the rental income is not self-employment income. So what would count here is the dairy farm income. He gets credit for his earnings from the dairy farm on his Schedule SE and you get credit for your income on your Schedule SE. Those Schedules SE are sent from IRS to SSA to add to your SSA earnings records.

This next bit is important. While for income tax you are never required to take a deduction you are entitled to take (the IRS is happy to take the extra tax), for FICA taxes SSA does not feel the same way. Inflating your self-employed income to increase the income you get credited for to determine SSA benefits is improper. So intentionally not claiming the dairy farm expenses to inflate the self employment income and boost your SSA earnings record isn't something you may do.

Note too that late filing of the Schedule SE is a problem, too. If I recall correctly, if you don't file the return with the Schedule SE within three years of the return due date SSA won't count it, even if you file it later on.

You need a total of 40 quarters (10 years) of wages earned or self-employment income to qualify. Because SSA does not get information by quarter, what it does is give one credit per a certain amount of income earned in a year, with a maximum of four credits per year. The amount that gives you a credit changes each year, but for 2019 that amount is $1,360. So, if you earn at least $5,440 (4 x $1,360) in wages or self-employment income in 2019 you get the full four credits for this year.
 

LdiJ

Senior Member
Your husband might want to consider getting a part time job that earns him at least 500.00 or so a month to gain the needed credits. It will take him close to four years to make it happen, but its a way around things.
 

steffb503

Member
There are a couple of things to know here.



Note too that late filing of the Schedule SE is a problem, too. If I recall correctly, if you don't file the return with the Schedule SE within three years of the return due date SSA won't count it, even if you file it later on.

You need a total of 40 quarters (10 years) of wages earned or self-employment income to qualify. Because SSA does not get information by quarter, what it does is give one credit per a certain amount of income earned in a year, with a maximum of four credits per year. The amount that gives you a credit changes each year, but for 2019 that amount is $1,360. So, if you earn at least $5,440 (4 x $1,360) in wages or self-employment income in 2019 you get the full four credits for this year.
So would it be amending a return to now file the SE for three years back?

Going forward, if we can amend the SE for 3 years he only needs 2019 to earn the balance of credits, he can earn that in farming correct?

I went back and looked at our taxes for the last few years. I realize only my name was on the income from the farming. Can I amend to simply add his name so the income is both and also file the SE tax?
 
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