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Self-Employment Tax and Social Security Payment

Forum|Forum|2 years ago
August 30, 2023
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My wife and I are both retired and living on social security. She started an Etsy business in 2021, which produces a minimum income ($3,000 in 21), which I included on our joint 2022 income tax return. However, the income wasn't enough to exceed the standard deduction allowance when filing through TurboTax. Am I still required to file self-employment taxes and pay into social security? If age is any consideration, I am 75 and she is 73.

Ask the Experts - Self-Employed - Aug 2023

Best answer by conniem123

Hi kboy116!

Thank you for the question today! Congratulations on retirement!

The IRS does require you to file an income tax return if your net earnings from self-employment were $400 or more. Keep in mind this is net earnings, which is income less her business expenses.

As long as her net earnings are $400 or more, you will need to include on your tax return, and the self-employment tax too.

I hope this information is helpful. Have a great day!

Connie

C

conniem123Answer

Hi kboy116!

Thank you for the question today! Congratulations on retirement!

The IRS does require you to file an income tax return if your net earnings from self-employment were $400 or more. Keep in mind this is net earnings, which is income less her business expenses.

As long as her net earnings are $400 or more, you will need to include on your tax return, and the self-employment tax too.

I hope this information is helpful. Have a great day!

Connie

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K

KBoy116Author

So, do I start fresh with 2023 income tax return? Or do I need to file a corrected return for last year (2022)?

Do I need to file these taxes quarterly or can they be included on the annual return?

Will the Turbo Tax software walk me through the process?

Thanks,

Laura_CPA

To answer your first question, I need to respectfully ask you what is making you think you need to file a corrected return? Have you not included social security benefits as income or the net profit from the business?

If you believe you will owe the IRS $1,000, you are required to make estimated tax payments, these are pre-payments and will pick them up on your annual tax return to offset any tax liability.

Turbotax will help you in this process, in fact, if you owe taxes, our system will automatically prepare the estimated tax vouchers based on your income for that year. We recommend you use our Tax Calculator to estimate how much you will owe.

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Laura_CPA

Hello KBoy116,

Hope all is going well with you and your wife. Happy to answer your question, normally your net profit from a business is subject to self-employment taxes even when you are receiving social security benefits. In fact, some of the social security you receive may be taxable up to 85% when you have other sources of income (in your case, Etsy business with a profit).

Unfortunately, your age does not currently exempt you from paying self-employment taxes, shocking, right? With the new tax reform and economy, we noticed a lot retired individuals had to go back to work part-time and when they would do their taxes, they were not happy to find out that they had to pay taxes on the social security benefits they were receiving because of their new part-time job.

Hope this helps, please let me know if I have answered your question.

Cheers,

Laura

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