Self-employed with income over yearly limit but retiring in December - how does SS verify monthly earnings?

Listen, the way SS handles this is completely frustrating!! When I retired (also self employed), they initially calculated my income as if it was evenly spread across all 12 months even though I CLEARLY told them I stopped working in October. Took me FIVE MONTHS of calling and paperwork to fix the overpayment notice they sent me. Make sure you document EVERYTHING. Keep a business diary of when you stop working, final client billings, etc. They'll want proof later, trust me!

The Social Security Administration does have a process for handling this situation. When you're self-employed, they look at both your work activity and your income. For the month you claim benefits (December), you'll need to show: 1. You provided minimal services to your business (less than 45 hours in the month) 2. The income you received in December was below the monthly limit You should keep detailed records of: - Hours worked in December - Income received specifically in December - The date you effectively retired/stopped substantial work When you file your tax return for 2024, you can include a signed statement explaining your work pattern and retirement date. You can also file Form SSA-131 (Employer Report of Special Wage Payments) to clarify which income was earned before you started receiving benefits.

dont even worry about it my brother did same thing they never checked lol. as long as you stop working that month youre good they dont have time to check everyones monthly income

I navigated this exact situation last year. For self-employed individuals, SSA looks at your "pattern of work" rather than just the money earned in a specific month. Here's what worked for me: 1. I kept a detailed log of all business activities and hours worked each month 2. I wrote a formal letter to my clients announcing my retirement date 3. I made sure my December invoices were minimal (below the monthly limit) 4. I filed Form SSA-795 (Statement of Facts) along with my tax return explaining my work pattern 5. I arranged for my accountant to specifically note on my Schedule C that the majority of income was earned before December The most important thing is proving you substantially reduced your services in the month you claim benefits. If you've been working 40+ hours weekly and suddenly claim zero in December, they may question it without supporting documentation.

I tried calling the SS office for 3 WEEKS straight with a similar question last year and could never get through!! Just disconnections or 3+ hour wait times. So frustrating when you just need a simple answer about retirement benefits.

Update: I called the SSA and after being on hold for almost 2 hours, the agent told me I need to track my "countable earnings" for December. Apparently for self-employed people, they look at both when you perform the services AND when you receive payment. So if I get paid in December for work I did in November, that still counts toward December's earnings limit. This seems really complicated to track!

why not just wait till ur full retirement age then u dont have to worry about any income limits?? thats what my wife did way easier

Just be aware that if they determine you earned too much, they don't just reduce benefits for that month - they take BACK money they've already paid you! My neighbor had to repay almost $4,000 because he didn't properly document his retirement from his small business. The monthly earnings test is actually more complicated than the annual one because the burden of proof is on YOU to show when you earned what.

One additional suggestion - consider setting up a meeting with your local SSA office BEFORE December. Bring documentation of your planned retirement date and ask them specifically what they'll need from you. Getting ahead of potential issues is much easier than fixing them after the fact. Also, make sure you understand how the earnings test works if you exceed the limit. For every $2 you go over the limit, benefits are reduced by $1. However, it's not a cliff - you don't lose all benefits just for going over. In the year you reach FRA, the earnings test becomes more lenient ($56,520 for 2024), and the reduction is $1 for every $3 over the limit. But this only applies to earnings in the months BEFORE the month you reach FRA.

I went through something very similar when I retired from my consulting business in 2022. One thing that really helped me was creating a "business wind-down timeline" that I shared with SSA proactively. I documented when I stopped taking new clients, when I completed final projects, and when I issued my last invoices. This timeline became crucial evidence that I had genuinely retired in my benefit month, not just reduced my hours temporarily. Also, be prepared for SSA to ask about your business assets and whether you're truly retired or just taking a break. They may want to know if you still maintain professional licenses, business insurance, or office space. Having clear documentation that you've wound down these aspects of your business helps establish that your retirement is genuine. The earnings test can feel like a minefield for self-employed folks, but with good documentation and proactive communication with SSA, it's definitely manageable. Good luck with your retirement planning!