 Caution, so be sure to report all of your self-employment income. By not reporting all of it, you could cause your social security benefits to be lower when you retire. That's gonna be the point. So as we're putting money in, we wanna try to maximize our social security benefits now, which is a difficult thing to do because it's a moving target and the laws could change at any given time going in. But the more money we put into the social security, the more we should get out in the terms of benefits. So how to become insured under social security. So you must be insured under social security system before you begin receiving social security benefits. You are insured if you have the required number of credits, also called quarters of coverage discussed next. So earning credits in 2022 and 2023. For 2022, you receive one credit up to the maximum of four credits for each $1,510, $1,640 for 2023 of income subject to social security tax. Therefore, for 2022, if you had income, self-employment, and wages of $6,040 that was subject to social security tax, you receive four credits. That's $6,040 divided by $1,510 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 SSA office. So you can really dive into the research on that and dive into the weeds if you want. There's a lot of information. And a lot of information. Caution, making false statements to get or to increase social security benefits may subject you to penalties. So that could be bad, that might be fraud if you're intentionally falsifying documents. The SSA time limit for posting self-employment income. Generally the SSA will give you credit only for self-employment income reported on tax return filed within three years, three months and 15 days after the tax year you earned the income. So there's like a statute of limitations on when to file that should be well within the timeframe that you would file, normal conditions. So 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 self-employment income. So who must pay self-employment tax? You must pay SE self-employment tax and file schedule SE self-employment schedule form 1040 if either of the following applies. One, your net earnings from self-employment excluding church employee income were $400 or more. So that's a substantially low limit. So most people that have a schedule SE are gonna have to file self-employment tax. So two, you had church employee income of $108.28. That's one of those ridiculously low numbers that never increased with inflation. So now it just looks funny. So we look at these numbers now and like, where did they come up with those numbers? You just laugh at it because it got stuck in the code and they never increased it with inflation. So now those numbers at one time were significant but now they look funny. Caution, the SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. So if you're subject to self-employment tax, you have to pay the self-employment tax even if you're past the age of where you should be getting benefits from the self-employment tax. If you didn't have that, you can imagine people running scenarios where they're gonna have all these old people running the shell leader of the business just like that, what was that mob movie where they had the old guy pretending he was the boss but he wasn't the boss because they wanted to, because they wanted to get a tax benefit or something. Caution, SE tax rate. The SE tax rate on net earnings is 15.3%, 12.4%, social security tax plus 2.9% Medicare tax. So notice that if we pull out the trustee calculator here, if you're a W-2 employee, your withholdings are 0.062 or 6.2%. And the employee IRR pays the same plus 0.062 which is the 12.4, see? So you're paying the employee and the employee IRR portion and then if you look at your Medicare that got withheld from your paycheck, then it would be 0.0145 or 1.45% times two. And that's where you get the 2.9. So they're basically treating you as if you are an employee of your own business even though you didn't give yourself a W-2 but the net income is kind of treated like W-2 income because they're gonna be charging you basically payroll taxes on it but not just the employee portion of the payroll taxes, they're gonna hit you with the employee and the employee IRR portion in essence of the payroll tax. So maximum earnings subject to self-employment tax, only the first 147,000 of your combined wages, tips and net earnings in 2022 is subject to any combination of the 12.4 social security part of the SAE tax, social security tax, self-employment tax, social security tax or the tier one part of railroad retirement. So you might ask, why is that the case if your schedule see income, then is that 147,000 or more? Let's see your net income was 200,000. You're only gonna be paying that portion of the 12.4 not including the Medicare part, the social security only part up to the 147,000 even though you made 200,000. Why? You might say that's a benefit to rich people in that case. They're benefiting rich people because they stop having the pain of the social security tax. Well, the idea would be, well, if when it was a social security, when it was a safety net program, then that would kind of, then it wouldn't make so much sense. You would say, okay, if it's a safety net program, you wouldn't have that cap just as they don't have the cap with the Medicare. It goes on forever because it's a low tax. But now that we treat social security more as a retirement program that everybody's gonna benefit from, then you would think that the more that you pay into the retirement program, the more you should get in benefit. A benefit concert. And after you get to some threshold of income, the benefits that are gonna be paid out are no longer being increased by added increases to your income. And the amount of the tax rate, 12.4% is significant. And so that's why it kinda caps out there. So people will always argue about that cap. That's always a question. If the government needs to be funded, just raise that to infinity, right? But I mean, obviously the issue here is that that 12.4% isn't a safety net level rate. That's like a, because it's being treated kind of like it's a retirement program for everybody. And that's where it gets a little funny. So people argue over that rate. So, but in any case, that's where the cap is. So it gets a little funny when you deal with higher income individuals to try to figure this out because if it's below that rate, it's more of a flat tax. And then it hits that cap, which kinda makes things messed up a bit. So all your combined wages, tips and net earnings in 2022 are subject to any combination of the 2.9 Medicare part of the SE tax that there is no cap here because Medicare is more of like a safety net program system, Medicare tax and Medicare part of the railroad retirement. So if wages and tips you receive as an employee are subject to either social security tax or the tier one part of railroad retirement tax or both and total at least 147,000, do not pay the 12.4% social security part of the SE tax on any part of your net earnings. However, you must pay the 2.9 Medicare tax part of the SE tax on all your net earnings. So in other words, you can imagine this gets even messier when you have self-employment tax that you're paying and you're working as a W2 employee, which normally withholds half of the social security. So now you've got a situation because you shouldn't be paying any more no matter where the self-employment income came from of this 147,000. And now there's actually a difference in terms of the amount of tax you would pay to get to that 147,000 because if you were a W2 employee, you would only be paying half of this but when you're self-employed, you've got to pay like twice of it. And so what if you were self-employed and a W2 employee? And so then again, so tip deduct one half of your SE tax as an adjustment to income online 15 of schedule one. So here's where it gets messy again because now like they're trying to make the self-employment tax as if you were the employee employer portion of yourself for the net income on your schedule C and they're trying to mirror that to what happens on an employee employer situation and like a C corporation. But in a C corporation, they deduct the total expenses of the earnings including the withholdings that they paid to the employee plus they get to deduct their half of the social security and Medicare tax as payroll taxes. So if you're gonna tax us as a sole proprietor both the social security and Medicare employee employer tax portion on the net income I should get to deduct at least the half of the tax that was like the equivalent of the self-employment half of the tax if I was a schedule C. And so you can, but you would then think, well, then I get to deduct that on the schedule C but you can't deduct it on the schedule C because then you'd end up with a loop reference a circle reference, right? Because you use the schedule C to figure out the tax in the first place. So they gotta deduct it somewhere else. So then you get to deduct half of the self-employment tax on the schedule one above the line deduction.