Can I apply for Social Security if I’m self-employed? The simple answer is yes because self-employed individuals are still required to pay Social Security taxes, like any other working person.
These taxes fund the national Social Security system, which offers emergency, disability, and retirement benefits to elderly individuals and their family members.
Read this post to the end to learn how much you should pay into the Social Security system if self-employed, how to pay, and how to apply for benefits.
How Do Self-Employed Individuals Pay Social Security Taxes?
You are self-employed if you are a business owner or work as a freelancer. This implies that you must disclose your Social Security income when filing your income tax returns.
In a regular work setting where you receive a W-2 form from your employer, you and the employer contribute 6.2% of your salary. Likewise, each of you pays a Medicare tax of 1.45% on everything you earn. Your employer usually deducts these sums from your salary and files the taxes.
In a self-employment setting, the Social Security Administration (SSA) considers you as both the employer and employee, hence liable for contributing the whole sum. As of 2023, you are required to pay a Medicare tax of 2.9% and a Social Security tax of 12.4% on earnings up to $160,200.
You must also contribute an additional 0.9% in Medicare taxes if your yearly income exceeds $200,000 for single filers and $250,000 if you are married and filing jointly. Medicare and Social Security taxes are collectively referred to as Self-Employment Taxes.
If your annual income exceeds $400, you should indicate that and file your returns to the Internal Revenue Service (IRS) using Form 1040. Self-employed individuals must submit a yearly return and make quarterly approximated tax payments.
You can consult an income tax expert or the Electronic Federal Tax Payment System (EFTPS) to make approximated quarterly payments.
Some self-employed persons, especially those who integrate agricultural and non-agricultural income, may opt to pay Social Security taxes while they earn less than $400 per year.
Social Security Work Credits for Self-Employed Workers
The SSA uses a credit system to establish who qualifies for benefits. Different credit criteria apply based on the kind of benefit one is seeking. However, employed and self-employed individuals are subject to an identical credit system.
A specific amount of annual income is required for work credits, which increases yearly with average income levels.
As of 2022, you could receive one work credit with an income of $1,510 and up to four work credits annually. But in the 2023 tax year, you need $1,640 to earn one credit.
Retirement benefits
You may need a certain number of work credits to qualify for benefits based on your age and kind of benefits you want. A person born after 1929 filing for retirement benefits must have 40 work credits or have worked for ten years to qualify.
Disability benefits
You must determine how many work credits you have in accordance with when your disability started and how long you worked before that to be eligible for disability benefits.
For instance, if you suffer a disability before you turn 24, you will need 18 months in the three years preceding the onset of the disability that prevents you from earning a living.
On average, you would require a minimum of 20 work credits from the prior ten years if you were above 31.
Survivor benefits
Survivors, including widows raising young kids, disabled children, or divorced couples, may occasionally claim Social Security benefits of a deceased family member. Usually, the deceased must have worked for ten years before passing away- but circumstances may differ.
Self-Employed Social Security Benefits
The Social Security Administration (SSA) uses the average monthly earnings during your 35 most productive years to determine how much you have accrued in retirement benefits.
Next, the primary insurance amount formula is then used to calculate your monthly benefit amount. The result shows you will receive when you reach full retirement age (FRA).
Generally, you can begin collecting retirement benefits at age 62. But you are only eligible for full benefits after reaching FRA, which ranges from age 66 to 67, based on your birth year.
Both conventionally employed and self-employed individuals use the same formula to determine their Social Security payments.
How To Claim Social Security Benefits
As a self-employed worker, you apply for benefits in the same way that typical workers do. Workers may call the SSA or file an online application for benefits.
Those who have reached FRA or older can continue to receive benefits while still working and earning a living.
But those under FRA will face an income cap if they keep working since the SSA deducts a dollar from a worker’s payout for every two dollars earned beyond $21,240 as of 2023.
If you are self-employed, a payment only counts as income when you receive it. For instance, if you performed some freelancing work in November 2022 but were not paid for it until February 2023, you should file this income in your 2023 taxes.
The Bottom Line
So, Can I apply for Social Security if I’m self-employed? Yes. There’s no difference in Social Security requirements whether you are employed or self-employed.
Self-employed individuals need work credits just as typical workers and qualify for benefits based on their income and work credits.
That means you can apply for benefits as long you have reached FRA. But consider speaking with a tax expert to know how much you can receive after reaching FRA.
Legal Giant can help if you are having challenges finding an experienced Social Security lawyer. We partner with the best attorneys and can link you with one to help determine your eligibility, how much you are entitled to, and even help with the application process.
Contact us at 833-641-1650 to speak to a Social Security attorney today.
