Reporting Wages to Social Security

Introduction

According to Social Security regulations, all disability beneficiaries “must” report earned income or wages. Social Security periodically scans claimants’ Social Security numbers against the Internal Revenue Service’s numbers. If wages show up on your tax number, Social Security will want to talk to you sooner or later.

Reporting Wages: Social Security Disability Income (SSDI)

If you collect SSDI, you should report all earned income over $700 gross (Annually Indexed) per month. Call your local office and ask for the SSDI representative to let them know. The office should send you a Work Activity Report--Employee (Form #SSA-821-BK). If your income from work is over $700 per month, they will enroll you in the Trial Work Period.

The Work Activity report asks questions about your work, your wages, and deductions you claim against your gross countable monthly earnings. These allowable deductions can be for self-employment business expenses, Impairment Related Work Expenses (IRWE’s) or “subsidized employment.” Subsidized employment is when an employer pays you more than your work is worth. Social Security counts the lesser figure.

Social Security offices are often slow about tracking wages. Even if you call and let them know, you may never hear from them again, or only after a couple of years have passed. Some offices never send out the Work Activity Report. The best advice is to take charge of your earnings reports yourself. When you call to report wages, insist that the office send you a Work Activity Report and receipt of notification -- a signed and stamped paper -- so you have proof that you called.

Keep track of your monthly gross earnings (pay stubs, etc.). Social Security will calculate your earnings month by month. If you do not keep track, Social Security could “average” out monthly earnings, which can work to your disadvantage, depending on amounts. It is important that any pay stubs, Work Activity Reports or other documents sent to Social Security be originals. Also, send all materials certified mail and make copies for yourself.

Reporting Wages: Supplemental Security Income (SSI)

You are supposed to report all earnings, no matter what the amount. When you call your local field office, you should ask to speak to an SSI representative. Social Security will ask you to come in with proof of your wages every month (of if asked to mail, be sure to send certified mail and keep copies for your records). They deduct money from your benefit according to the “eighty-five-and-a-half” rule. The first $65 you earn, plus another $20, is not counted against you. But your benefit is reduced by $1 for every $2 that you earn over $85 (If you made $285 in a month, your benefit would be reduced by $100).

Social Security prefers to know beforehand how much you will be making. They adjust your check accordingly. If you report after the fact, they will adjust retroactively. They can also adjust quarterly or yearly. Again, the best advice is to keep track of your earnings yourself, report them prior to working, and make good use of impairment related work expenses to reduce your gross countable earnings. Earning over $980 a month does not necessarily result in a review of your claim.

Self-employment wages are measured by net profit and are averaged out. If you tell them you’re going to be earning $400 a month through self-employment, they will use that figure to calculate benefits (for SSI) throughout the year. If it turns out, in the end, you earned more or less, but not $400, then you will need your records to get proper adjustments at year’s end.

Overpayments

If you do not report wages to Social Security, or if they fail to take deductions from your checks, sooner or later you will have an overpayment. Keep records of your employment, wages, taxes, etc. If Social Security charges you with an overpayment, you will need accurate records to present your case. If you are self-employed, you can take federal income tax deductions, and those allowed under Social Security’s rules, to reduce gross countable income to net profit. But you will need receipts, tax forms, etc., to prove your expenses.

Social Security can attach federal income tax returns and future retirement benefits to collect on overpayments, and can also attach wages. If you know you are getting checks you should not be getting, bank them or return them to Social Security, because sooner or later they will want their money back.

Summary

You are supposed to report all wages to Social Security if you collect SSI; all wages over $700 gross per month if you are on SSDI. SSI benefits will be immediately affected by any earned income over $85 a month; SSDI benefits may be affected, depending on the amount you earn. Call your local office to report income. Do not call Social Security’s 800 number. Get written proof that you have reported (or use certified mail). Keep accurate records (W-2s, pay stubs, etc.) of your wages. Maximize any deductions from gross monthly wages. Keep your medical files current, document all on-going symptoms, so you can prove that you are still disabled even if you are working.