Social Security earnings limit confusion for self-employed retiree turning 65 mid-year - how does proof of income work?

Yes, Social Security will look at the annual tax return, but you can provide monthly income verification. You'll need to keep detailed records of when income was earned (not just when it was paid). For self-employed individuals, SSA uses a special calculation where they deduct business expenses proportionally. For example, if he earned $28,000 through May and had $8,000 in annual business expenses, they would allocate the expenses proportionally to the months he worked (5/12 of the expenses). Make sure to notify SSA that he's retiring mid-year so they can apply the monthly earnings test rather than the annual one. The monthly test allows higher earnings in non-retirement months. Keep good documentation showing the business shut down - final client invoices, business closure documents, etc.

im in same situation last year. retired in august from my own business. You HAVE TO TELL THEM when u apply that ur retiring mid-year! they didnt explain it to me and i got hit with an overpayment notice in april this year becuz my tax return showed more than the yearly limit. had to appeal and show all my invoices from after august were from work done before i retired. BIG MESS

For self-employed individuals, SSA applies different rules than for W-2 employees. They evaluate both your work activity and your income. Even if earnings appear on your annual tax return, what matters is when the work was performed and when he provided substantial services to his business. SSA applies what's called the "special earnings test" for self-employed people that considers: 1. Hours worked in the business (more than 45 hours/month is considered substantial) 2. Nature of services provided 3. Income received He should keep detailed records of: - When work was performed for each client - Hours worked each month - When the business officially closed - Final client communications When he applies, specifically mention he's retiring mid-year so they can apply the monthly earnings test for the grace year (first year of retirement).

My husband went thru this last year and they STILL messed it up! They kept sending us letters saying he was over the earnings limit even tho we told them repeatedly he retired in April. Spent WEEKS trying to get someone on the phone!!

wont he be at FRA at 66 and 2 months anyway? why worry about the earnings limit if hes turning 65 in June? he only has to deal with this for like a year right?

When I retired early from my business, I had my accountant prepare a statement showing monthly income distribution and when the business ceased operations. SSA accepted this without question. They're actually pretty reasonable if you provide clear documentation upfront. Don't stress too much about it!

One thing nobody has mentioned: if your husband exceeds the annual earnings limit, SSA withholds benefits at the rate of $1 for every $2 earned above the limit. For 2025, the annual limit is approximately $22,320 (they adjust for inflation each year). Since he's earning $28,000 through May, that exceeds the annual limit by about $5,680, which would mean approximately $2,840 in benefits might be withheld. However, if he qualifies for the monthly earnings test in his first year of retirement, this won't apply as long as he earns under the monthly limit (about $1,860) in the months he's receiving benefits. Also worth noting: once he reaches FRA, they'll recalculate his benefits and give him credit for months they withheld benefits, potentially increasing his monthly amount going forward.

WHATEVER U DO, keep copies of EVERYTHING! my friend lost all his paperwork showing when he stopped working and SSA made him pay back like $9000!!! they claimed he was working all year when he wasnt!