26 Apr Can someone who never filed tax returns get Social Security?

Q. A person I know has not filed tax returns for more than 20 years because she doesn’t have a regular job. She gets odd jobs — just enough to feed herself. But now she wants to start paying income tax so she can establish Social Security when she gets old. How can she start?
— A friend

A. Your friend should work with a qualified tax preparer to examine her history and determine whether or not she should have filed tax returns over the years.

Note that even if she’s only done odd jobs, the IRS says all income needs to be reported. Specifically, it says it includes “cash earned from side jobs, barter exchanges of goods or services, awards, prizes, contest winnings and gambling proceeds.”

When she meets with a tax professional, she will need to address whether she’s been self-employed for tax purposes or if she’s an employee of someone else, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

“This gets to her goal of paying in towards Social Security, including Medicare,” Maye said.

If she is self-employed, she would be paying tax as both the employer and the employee, compared to if she was employed by someone else, in which case the employer would pay the employer part of payroll tax, he said.

“For W-2 employees, Social Security is withheld from their wages while self-employed individuals pay their Social Security taxes when they file their income tax return,” Maye said.

Also, to be eligible to collect Social Security down the road, an individual must also have 40 Social Security. In 2022, an individual receives one credit for each $1,510 of earnings up to a maximum of four credits per year, Maye said.

He also noted the number of credits for an individual unable to work due to significant health issues can be much lower.

If your friend was ever married, even if she’s now divorced, she may be entitled to a spousal Social Security benefits even if she does not qualify under her own earnings record, Maye said.

Finally, he recommends she go to the My Social Security website to establish an account to see whether she has already earned any credits based on her past work.

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This story was originally published on April 26, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.