Social Security is a government program designed to provide financial support primarily for the elderly and disabled. Whether you work for someone else, or are self-employed, you are entitled to Social Security benefits.
What is the Difference Between Self-Employed vs. Employed by Someone Else?
The primary difference is that a self-employed person must contribute twice as much. An employer will deduct Social Security from an employee's paycheck and match the contribution. The combined contributions will equal the employee's required Social Security payment. On the other hand, a self-employed person must make a full contribution when filing income taxes. The Social Security tax rate for self-employed people is approximately 15%.
How Do I Qualify for Benefits?
To qualify for Social Security benefits you usually need to accumulate 40 work credits. Generally, you receive one credit for every $900 in earnings as a self-employed individual. Since you can only earn up to four credits per year, you must work at least ten years to draw Social Security benefits.
What if We Operate a Family Business?
Families sometimes run joint ventures or partnerships. Each family member should report their share of the business earnings on separate self-employment returns, even if you are filing a joint income tax return.
How Do I Apply for Benefits?
When you are ready to file for retirement or disability benefits, the standard procedure is to contact the Social Security Administration and file a claim. You do not have to take any additional measures just because you are self-employed.
Do I Need a Lawyer?
Social Security regulations are complex. An attorney experienced with Social Security regulations can help you maximize your accumulation of work credits while minimizing your contributions. A government lawyer can discuss which Social Security benefits you should be receiving and assist you if you need to appeal a denial of benefits. For more information see this article regarding Self-Employment and Social Security Lawyers.