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SSD for the Self-Employed

When it comes to paying into the Social Security program for retirement and disability benefits, most people who pay the Social Security tax happen to be a W2 employee. For employed workers, it’s easy. Before the employer issues their employees a check, first they deduct the employee’s Social Security taxes from their paycheck. The employer matches the contribution, forwards the taxes to the IRS, and then reports the employee’s wages to the Social Security Administration.

For the self-employed worker, it’s not so simple. They don’t have an employer to match their contributions, nor do they have an employer to report their Social Security earnings for them. Instead, self-employed workers must pay the IRS directly and they must report their earnings themselves.

You are considered self-employed if you are not a W2 employee. You are self-employed if you own a business, or if you operate a trade or profession. When you file your federal income tax return, you report your earnings to the Social Security Administration. “If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file,” according to the SSA.

Some Income Isn’t Counted for Social Security

When paying into Social Security, you have to figure out your net earnings, which are the gross earnings from your business or trade, minus deducting the allowable deductions as well as depreciation. Not all income is counted for Social Security purposes. The following type of income are not included when you’re calculating your net earnings:

  • Dividends from stock,
  • Interest from bonds, unless you were a dealer in stocks and securities,
  • Rental income from real estate, unless you deal in real estate and you regularly provide the occupant services,
  • Income that you obtained through a limited partnership, and
  • Interest from a loan, unless your business lent someone money.

Do you qualify for Social Security disability benefits as a self-employed worker? The answer depends on three things: 1) if you paid enough Social Security taxes, 2) if you worked long enough to be eligible, and 3) if you meet the SSA’s definition of a disability.

To discuss filing a claim for disability benefits, contact The Zendeh Del Law Firm, PLLC.