Social security benefits.
Social security coverage provides you with retirement benefits,
disability benefits, survivor benefits, and hospital insurance
(Medicare) benefits. Your payments of self-employment tax (SE tax)
help pay for your coverage under the social security system. Social
security benefits are available to self-employed persons just as they
are to wage earners.
How to become insured under social security.
You must be insured under the social security system before you
begin receiving social security benefits. You are insured if you have
the required number of credits (quarters of coverage). It does not
matter whether the income is earned in one quarter or is spread over
two or more quarters.
Earning credits in 2000.
You can earn a maximum of four credits per year. For 2000, you earn
one credit for each $780 of income subject to social security taxes.
You need $3,120 ($780 x 4) of self-employment income and wages
to earn four credits in 2000.
For an explanation of the number of credits you must have to be
insured and the benefits available to you and your family under the
social security program, consult your nearest Social Security
Administration (SSA) office.
Making false statements to get or to increase social security
benefits may subject you to penalties.
How To Pay Self-Employment Tax
To pay SE tax, you must have a social security number (SSN). This
section explains how to:
- Obtain a social security number, and
- Pay your SE tax using estimated tax.
Obtaining a social security number (SSN).
If you have never had an SSN, apply for one using Form SS-5.
You can get this form at any Social Security office or by calling
You can also download Form SS-5 from the Social Security
Administration web site at www.ssa.gov.
If you have a social security number from the time you were an
employee, you must use that number. Do not apply for a new one.
Replacing a lost social security card.
If you have a number but lost your card, file Form SS-5. You
will get a new card showing your original number, not a new number.
If your name has changed since you received your social security
card, complete Form SS-5 to report a name change.
Paying estimated tax.
Estimated tax is the method used to pay tax (including SE tax) on
income not subject to withholding. You generally have to make
estimated tax payments if you expect to owe tax, including
self-employment tax, of $1,000 or more when you file your return. Use
Form 1040-ES, Estimated Tax for Individuals, to
figure and pay the tax.
However, if at least two-thirds of your gross income in 2000 or
2001 is from farming and you file your Form 1040 and pay all the tax
due by March 1, 2002, you do not have to pay any estimated tax for
farmers. See chapter 2
for more information about estimated tax for
Penalty for underpayment of estimated tax.
You may have to pay a penalty if you do not pay enough estimated
tax by its due date.
Social Security Administration (SSA) time limit for posting
Generally, the SSA will give you credit only for self-employment
income reported on a tax return filed within 3 years, 3 months, and 15
days after the year you earned the income. If you file your tax return
or report a change in your self-employment income after this time
limit, the SSA may change its records, but only to remove or reduce
the amount. The SSA will not change its records to increase your