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Social Security Discusses Small Businesses

Researchers have found that small business startups during the COVID pandemic grew by almost 25-percent from 2019.

 

As more people look to create their own success through owning their own businesses, the Social Security Administration is reminding business owners to keep them in mind. Jack Myers indicates those who enjoy the independence of owning their own business, know that they have additional financial responsibilities when reporting their taxes. Part of this includes paying into Social Security. Self-employed people must do all those actions themselves including paying both the employee and employer’s share of Social Security taxes.

 

 

According to Myers, small business owners report these earnings to Social Security when they file their federal tax returns. If they have net earnings of $400 or more, they must report on a Schedule SE in addition to other forms they must file. Eligibility for Social Security benefits is based on paying into the system. In 2021, net earnings of $5,880 or more earn you your yearly maximum of 4 credits. Ultimately, you need 40 credits for eligibility for retirement benefits, and we use your 35 best years to calculate your benefits.

 

 

Additionally, couples often run businesses together.  Sometimes they think filing a joint tax return is enough for both to get credit for the earnings, but Myers notes while this is enough to satisfy income tax requirements, you should consider whether or not it is appropriate to split the earnings for Social Security purposes. Each person’s share of the profits should be reported on a separate Schedule SE if each person wants to earn future eligibility for Social Security benefits. 

 

 

Learn more by visiting our website www.socialsecurity.gov/pubs and looking for If You Are Self Employed.

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