Q & A: December 2016

Q & A: December 2016

Help! Social Security Estimates That I Earned $500,320 And Stopped My Benefits! 

Q:  I started benefits at age 63 after losing my job in 2013.  I was able to find new employment the following year in 2014.  I received a letter from Social Security stating that I was overpaid for 2014 because they estimate that I earned $500,320, and that I need to repay more than $7,000 in overpayments!  Where did they get that?  I only worked part time and earned $18,200.  What can I do?

A:  You will need to respond to the Social Security Administration by stating that you are contesting the amount of earnings that the Social Security Administration says you had, and the amount of money they say you were over paid.  You should also ask Social Security for a review of your earnings record.  You may be a victim of identity theft and one or more people might be using your Social Security number to illegally work.

Since you have not reached your full retirement age, you are subject to the Social Security “earnings test” if you work and collect benefits at the same time.  Social Security recipients are required to report earnings if you collect benefits.  But if you are like many others, when you reported your modest earnings, a Social Security staffer may have told you, “Don’t worry, Social Security will automatically recalculate your benefits.”

In 2014, your $18,200 in earnings was slightly higher than the amount you are allowed to earn without reduction, which was $15,480.  Under the Social Security earnings test, if you are under your full retirement age the Social Security Administration will withhold $1 in benefits for every $2 in earnings in excess of the annual exempt amount.  In your case $18,200 is $2,720 more than $15,480 — the exempt amount.  That means Social Security should only withhold $1,360, not $7,000.

Since Social Security estimated that you earned $500,320, when you only earned $18,200, clearly there is an error.  To contest your earnings, dig out a copy of your 2014 W2s and income tax return, the one you filed April 15th of 2015.

The letter you received from Social Security should indicate a deadline for your response.  If you have missed the deadline, act quickly and contact Social Security requesting an extension.  You may indeed learn there is an error and be able to correct the amount of money to be withheld.  In addition, when you check your earnings record, you may need to contest earnings that don’t belong to you.

You can learn how the earnings test works and exempt amounts by year at: www.SocialSecurity.gov.  You can check your earnings record online by setting up a “my Social Security” account.  To contact Social Security by phone, call 1-800-772-1213, or visit your local Social Security office.