The Time Limit for Reporting Social Security Credits

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Self-employed taxpayers must report their Social Security earnings to the Social Security Administration (SSA) themselves because they don't have employers to deal with the task for them. They have a limited amount of time in which to do so: three years, three months, and 15 days following the end of the calendar year in which they earn the income.

You won't accumulate any Social Security credits for the unreported income if your earnings aren't reported within this time period. This three-year-plus period is especially crucial for self-employed individuals who file tax returns past the usual April 15th tax-filing deadline or who need to amend a previously filed tax return.

Key Takeaways

  • The SSA uses a system of credits based on annual and lifetime income to determine your benefits eligibility.
  • Employers will typically report your income to the SSA on your W-2, but if you are self-employed, this is your responsibility.
  • Credits are based on net earnings, which is the amount left after you've taken deductions.
  • You can register on the SSA website to view your annual earnings statement and to check it for accuracy.

What Are Social Security Credits?

Individuals earn a certain number of "credits" each year based on their wages and net self-employment earnings. They can earn up to four Social Security credits annually, and they must earn at least 40 credits over the course of their working years to be eligible for Social Security retirement benefits.

In 2022, you'll get one credit for each $1,510 in earnings per year ($1,640 in 2023), up to the four-credit cap. This is the case whether you're self-employed or you work for an employer.

Your employer will report your earnings for you if you work for someone else, but self-employed people should be sure to file their tax returns within the three-year, three-month, and 15-day time period.

Tip

You can use an optional method of calculating credits if your net earnings from self-employment are less than $400 after accounting for allowable business expenses, but you can only use this method five times over the course of your working life if your income doesn't derive from farming.

How Social Security Earnings Are Reported

Both wages paid by an employer and net earnings from self-employment count toward your Social Security earnings. Wages are reported to the Social Security Administration using Form W-2 if you also hold down a regular job. Your Social Security wages are reported in box 3 of Form W-2, and the Social Security tax you paid through withholding is reported in box 4.

Employers must file W-2 Forms with the Social Security Administration no later than January 31 for the previous calendar year. This more or less guarantees that wages will always be credited to your account for Social Security purposes within the three-year-plus time period.

Self-employment earnings from working as an independent contractor, freelancer, or running your own business or a farm are self-reported using Schedule C for non-farm businesses or Schedule F for self-employed farmers. You should include these schedules along with your Form 1040 tax return when you file it.

Schedule C and Schedule F

Only the net earnings from Schedule C or Schedule F count toward Social Security, and this can be somewhat tricky. For example, you might have had $75,000 in earnings from your small business over the course of the tax year. But if you also paid $25,000 in deductible business expenses, your net earnings are, therefore, $50,000. The Social Security tax is then calculated using Schedule SE.

Note

Schedules C and F calculate net income from gross income after deducting allowable business expenses.

Some self-employed taxpayers need a little extra time to gather all the information necessary to accurately file Schedule C, Schedule SE, and Form 1040 tax returns, and some end up filing late, even years after the original deadline has passed. It's important to file a tax return before the three-year time limit expires for getting Social Security credits.

The Law Behind the Three-Year Time Limit

The law that explains claiming your Social Security credits can be found in section 205(c)(1) of the Social Security Act, also sometimes referred to as 42 U.S.C. 405. This law provides the period of limitations to establish self-employment earnings for the purpose of earning Social Security credits.

Tax returns not filed within that period of time are not considered to be evidence of earnings for the purpose of establishing Social Security eligibility. Judges have ruled that returns have to be filed within the time limit to earn Social Security credits.

Note

Section 205(c)(5) also spells out when the Social Security earnings can be corrected and under what circumstances.

Tips to Ensure Proper Credits

The Social Security Administration no longer mails out annual Social Security statements, so you must register on the Social Security Administration's website to view a record of your earnings. You should check this annual statement periodically to ensure that your wages and net self-employment earnings are properly reflected. You must act before the three-year time limit expires to ensure you get credit for all your earnings if the reported earnings aren't correct.

You should also be sure to file your tax returns before the time period expires if you haven't done so and you were self-employed. The time limit of three years, three months, and 15 days give a self-employed individual until April 15 of the third year to file and still receive credit for Social Security purposes.

Frequently Asked Questions (FAQs)

What happens if I don't report my Social Security credits in time?

It depends on your situation, but failure to report your earnings to the SSA in time will, at best, delay or withhold your benefits. If your omission was somehow fraudulent or an attempt to game the system, you may be fined and liable for more severe penalties.

Does the SSA look at gross or net income?

For the purposes of calculating credits, your Social Security record includes only earned income, wages, or net income from self-employment. Other forms of income like pensions, investment interest or dividends, annuities (a.k.a. passive forms of income) do not count as earnings towards your credits.

How far back am I able to make corrections on my Social Security income?

According to the SSA: "An earnings record can be corrected at any time up to three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived." There are a few exceptions to this rule, though they are obscure and complicated. Also, it's always wise to make changes as soon as you can since processing times can take a while.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Social Security Administration. "Evidence, Procedure, and Certification for Payment."

  2. Social Security Administration. "If You Are Self-Employed."

  3. Social Security Administration. "Quarter of Coverage."

  4. Social Security Administration. "Fact Sheet Social Security."

  5. Social Security Administration. "How You Earn Credits," Page 1.

  6. IRS. "Topic No. 752 Filing Forms W-2 and W-3."

  7. Social Security Administration. "Calculating Your Net Earnings From Self-Employment."

  8. Social Security Administration. "SSA Handbook. Section 1423. Time Limit for Correcting Earnings Records."

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