Remember how those two women at Social Security told me it isn’t true that when you out-earn the poverty-level earnings limitation imposed on those who are forced to take SS payments early, the government takes away an entire month’s benefit check? That instead in the following year Social Security calculates what you owe in tax (it takes back $1 for every $2 you earn over $14,160, effectively a 50% tax), and you are given the option of either having the amount prorated over a number of months and deducted from your benefits in relatively affordable chunks or of sending the government a check to cover the tax?
Well, it turns out they were wrong.
After having told “Roselyn” that I expected to earn $14,900 this year, yesterday afternoon comes a notice in the mail informing me that my September check, which is paid in October, will be withheld, fuck you very much. Any amount that remains after the government calculates and confiscates the tax it thinks it’s owed will be repaid in January.
This will leave me $551 in the hole this month.
Feeling a little skeptical about “Roselyn’s” claim, as you will recall, I telephoned Social Security a second time on September 3, reaching one “Alison.” This CSR confirmed what Roselyn said and reiterated that the government’s procedure is not to take away an entire benefits check when it finds out you will exceed the earnings limitation.
Based on these two assurances, which were repeated several times by each woman during those conversations, I accepted a third course this fall, to run in the second eight-week session of the semester.
The pay for that contract will push my income high enough that Social Security will withhold not one but two benefits checks!
And that will put me $551 in the hole for September and for October or November, whenever they next get around to raping my income.
For God’s sake!
I don’t know what I’m going to do. I can’t get out of the course the chair offered to me and I accepted. Piss these guys off, and they won’t hire you again. So, I’m going to have to eat an $1100 shortfall. I certainly won’t be eating food, since at that rate I can’t pay the utility bills and buy groceries.
There are two choices:
1. Withdraw enough from The Copyeditor’s Desk as dividends to cover the shortfall. Actually, the S-corporation will have to pay me a few hundred bucks as “salary” in December, anyway. A $500 salary amounts to about $600 taken out of the corporate coffers, because as my “employer” CE Desk has to pay its half of FICA and some other taxes. For me as an individual, the net comes to about $375. So to make up a net of $1100, I will have to withdraw about $2,000 from CE Desk, in combined salary and dividends. That’s about half the corporation’s present cash holdings.
or
2. Raid savings set aside for an extreme emergency in which I would not be able to work at all. The emergency savings fund is still in an after-tax bank account, and so no tax consequences would occur if I steal from it.
However, if I get sick or hurt so I can’t work—and we’ve already seen that, as possibilities go, this is not as remote as one might think—then I will have that much less to cover my needs. As it is, emergency savings combined with Social Security would just barely cover expenses for one year. Take $1,100 out of it, and it’ll cover a helluva lot less than that: maybe 10 months.
God. What a mess!
Why did those two women tell me a phony story? Did they lie on purpose? Did they think it was funny to deliberately mislead some old lady and plunge her even deeper into poverty? I’m quite sure of what they said, because I asked both of them to confirm it, and I wrote it down as they were speaking: I have almost verbatim notes of our conversations.
Here’s how this shakes out, projected dollar by projected dollar:
Because the community colleges, like GDU, outsource their payroll to PeopleSoft, paychecks come in at cockamamie times. My second paycheck in October, when the third class kicks in, will only cover one week, and so I won’t have enough to cover my expenses that month, either. Apparently I’ll make it up in November (this assumes they rape me in September, which they’ve announced they’re doing, and then again in October, not in September and November). But meanwhile, between now and the middle of November I have to cope with a shortfall of over $1,000!
While it looks as though I’ll be flush as Croesus in November and December, that extra money has to be saved to cover the month-long winter break, when I’ll have no pay, and the penurious summer, when there’s a good chance I’ll have no teaching income.
{sigh}
What on earth to do?
Probably it would be better to take the $500 annual “salary” from the S-corporation in September or October; this nets about $375. It’s required, but there’s apparently you can pay it to yourself whenever you please.
Defraying the shortfall with a CE Desk “paycheck” would leave $725 to to make up out of savings, but with no tax consequences. That much remains in the S-corporation’s account, and so if a really dire emergency came up, the money would still be there. It’s your basic theft from Peter to pay Paul.
Assuming, though, that nothing awful happens over the next year, because property taxes have dropped a bit, I should be able to use that savings to help replace the $725 raided from the emergency savings fund. If I drop the umbrella on my car & homeowner’s insurance, the two cost reductions combined could be put toward the lost $725.
If the gods smile and I get three sections a semester next year, I should be OK. A summer-session course would guarantee OK.
But it looks like we’re talking just OK here. Short of taking a large drawdown from long-term savings that are still struggling to recover from the crash, we can forget any fantasies about vacations next year. 🙄
On the other hand…it’s a nice opportunity to go back on the half-off diet!
This reminds me of so many of my dealings with bureaucrats–serious incompetence. Plus YOU have to pay for their errors.
I would definitely speak to the supervisors of your two sources of info. Actually, WRITE.
I think that your budget categories cause you a lot of unnecessary grief. You will get the money back from SocSec, right?
@ frugalscholar: I just sent off a three-page letter to the director of the local SS office. Tomorrow I’ll have to trudge in there, sit and wait for an hour to see a factotum, and ask about this among several other things, not the least of which is finding out where to send the SS-31 the state benefits office filled out, testifying that the RASL payments they’re disbursing are 2009 income. And the notice from the state Department of Economic Security announcing that, for unknown reasons, they’re paying me another 6 unemployment insurance payments for furlough days.
Who KNOWS what that was about? Apparently the feds got after the state, which is always in violation of one thing or another because of the leadership’s hostility to the working poor, and decided they owed us more money. It was impossible to tell how much they were supposed to pay in IU for those furlough days, or, since the payments were completely disconnected from the days, whether they were paying enough, too much, or what. It’s not much, but I’m not spending it. Gunna put it aside on the assumption that in a year or so, they’ll show up at the door demanding to have it back.
Hm. Evan may be right. I could be a closet conservative. Pass the Earl Grey, please.
It’s amazing that working can actual cause hardship and financial problems! Good luck. I have applied for jobs as an adjunct but have never managed to land a position. I even applied for department heads twice and got interviews because I was qualified. But, the university or college position is elusive!
I would probably use the emergency savings and stick it right back in when the money arrived. I raised the deductible and saved money. It was an enormous relief when I paid off house and car this spring! I live on very little. Your income looks enormous to me. Good luck on your endeavors.
I would invest in a digital recorder and tell them you need to record the conversation for whatever reason. Be sure to get their name and they should have some number as well. That is ridiculous and annoying. I do not think they did it on purpose or maliciously, I think many people simply don’t know how to do their job these days. Sorry about that Funny. I know you will figure out how to cope with it. I well remember getting government benefits and this is how they are. They like to keep you down to a certain level. I tell you, if I was even given $25 in a month they lowered the food stamps the next month. Good luck.
Sorry to hear of your troubles FAM. I’ve learned through my dealings with child support, courts, judges and government-run collection processes that I can only depend upon myself and to build up those reserves. Thanks for sharing your story, hopefully someone else won’t have to go through the same thing. They should never have told you something that wasn’t true.
My dad is 90 and 100% of his pension has been clawed back since he turned 65 despite paying into the system his whole life because he did build up those reserves though, so that kind of sucks too.
Not surprised that the individuals working for SS are misinformed, and I’m afraid you’ll get no recourse from your visit. People do get real conservative in their views when the gov’t repeatedly takes their money.
Curious why the S-Corp funds wouldn’t actually be a shareholder distribution? You have put funds into it upon startup and for equipment purchases, etc., right? Shareholder distributions against loans you’ve made to the corporation shouldn’t be subject to tax. – or – Why isn’t the corporation paying some of these expenses you’re worried about already?? Consult an accountant before you have it pay you salaried amounts as opposed to other designated expenses or repayments.
Thanks for the sympathies, everybody. The three-hour night made me kinda whiny this morning!!
@ Betsy: The business was up & running when I incorporated it. Little capital was put into it, because computers, phones, printer, office furniture & supplies were already in place. Yes, it does buy things like computer equipment and server space. Don’t think it can pay for the DSL & phone, because those are in a residence and some portions of both are used privately. It can’t buy my groceries or feed the dog or pay for the plumber and the AC repairman.
However, it can pay me a salary…I try to keep this as limited as possible while still being “reasonable,” because of the high costs of salaries. Whatever cash is not spent on the corporation’s operations or on its director’s salary can be disbursed as dividends.
Over the past year or so, it collected enough in its checking account to carry me through the fall semester if I only landed one section to teach, as appeared possible earlier this year. Now that I’m clearly going to earn enough by teaching to make ends meet, the corporation’s profits can stay there as a kind of backup emergency fund…which will come in convenient as the government removes $1,000 of my designated, real emergency fund to suit its whims.
Dividend distributions are taxed as ordinary income, so a drawdown of $1,000 would be worth about $750 or $770 in actual spending money. The emergency fund is sitting in an interest-bearing checking account. Withdrawing money from that is not a taxable event; $1,000 of it will buy $1,000 worth of goods and services. IMHO it would make more sense to use the emergency fund; reimburse it with whatever comes back in January after SS gloms its cut, and then just build up the fund to its previous glory with future savings. I’d rather use the S-corps funds to buy business-related electronic gear, supplies, services, and maybe someday travel to a conference in a nice venue.
Remember my earlier saga? I can feel your pain. I was the one with the unemployment nightware in MN. Now you’re paid, OOOOOPS – Now pay that back. And BTW pay back even more than you were paid. When you are unemployed, you can really afford to pay your taxes early. Oh and then after 5 weeks, we will now stiff you with a waiting week and then give you a new benefit year with a $75 shortfall each week. Since I did take a poverty level part time job, I can still take a pittance each week from my unemployment. I am so afraid there will be another OOOOOPs, now you have to pay back more again! Yes I am all for getting one of those pocket recorders and then going in person and talking to the highest person you can. Alas, but in the end, all it does is raise your blood pressure, waste your time and decrease the quality of your life. I am working on letting it go…
@ Barb: OMG! That reminds me, I haven’t told you all about the latest Unemployment Insurance weirdness!
Tomorrow!
Meanwhile, I like the recorder idea, too. Not that I’m trying to get any recourse or expect any. But I’ve got this Form SS-31 from the state testifying that the accumulated sick leave pay the state disgorged in February is actually 2009 pay, and I have no idea where to send it. I’m hoping they’ll take it off my hands, or at least give me the correct address. Then…heh heh heh…there’s the weird UI stuff to deal with: Social Security will have something to say about that, too. 😀
The problem with letting the hassle and bureaucratic BS go is that when you depend on the “benefits” to buy your groceries, you can’t let it go. Besides, THEY won’t let it go! As I remarked to SDXB this morning, it feels like these people are badgering me all the time. Every time I turn around, here’s another piece of paper in the mail, usually another form to fill out and return or some similar demand. And about every two or three months, here’s something else popping that requires you to get on the phone and sit on “hold” for 20 or 30 minutes to track down a CSR, like we all have plenty of time for that!
I don’t know exactly how the folks at Social Security exact their pound of flesh, but I do know that all they can do is reduce your benefit by $1 for every $2 earned over the earnings limit. That makes it a mathematical impossibility for your “excess” earned income to make you worse off. It’s just a matter of timing.
@ Pat. Yes, that’s so. If they would simply let you pay the amount owed at tax time, or present a bill and say “please pony up the 50 percent tax on the amount you earned in excess of the allowance,” that would be fine.
That would make sense, right? And that’s why Roselyn and Alison’s story seemed to hold water: it makes sense.
But that’s not what they do.
Instead, the minute they learn that you’re going to go over — and they badger you to report it — they withhold an entire month’s benefit payment. This, they hang onto until the following January. At that time, they withhold the amount owing and return anything that’s left.
Very nice. You get your after-tax money back. But meanwhile, the horse starves while the grass grows.
In theory, I was supposed to tell them, when I knew the school would pay me a $2,400 stipend for developing this fall’s online course, that I would go over the $14,900 limit. That stipend would put me $240 over the earnings limit, so that I would owe $120 in extra taxes ($1 out of every $2 of the $240 = 1/2 of $240). It was last June that I was told the school would pay this stipend, although the second half of it has yet to appear on anything that looks like a paycheck.
Okay. So to extract $120 from me, Social Security would, had I reported this the minute I knew it, cancel payment on a benefit check in July or August — when expenses are astronomical and I have zero teaching income. To get that $120, they would withhold $1,275!
I don’t owe $1,275. I owe $120. But the punishment — and I fail to see how anyone can call it anything but punishment — for crossing that magic line is loss of use of $1,155 for six or seven months.
Does no one see the essential unfairness of this?
Because the ladies who last spoke to me at SS either were misinformed themselves or misled me, I agreed to take on another class this fall, to earn much-needed money. Remember, I just spent the last three months without enough money coming in to cover my basic expenses.
Pay for that class will push what I owe to about $1,500, by the time the S-corp disburses my $500 “salary” in December. Because that amount is more than my $1,275 SS benefit, now they will withhold not one but TWO checks, which they will return at their convenience. When I go in tomorrow to discuss this and a couple of other issues, they will find out about the second course, and so presumably in October, November, or December they’ll rip out two checks — $2,550 — to cover the $1,500 owing.
Sure. I’ll get a thousand dollars back. But that doesn’t change the fact that somehow I have to live between now and then!
Merry Christmas! 🙂
yes Funny, you are right. I think in an earlier comment I said something about that I felt for those who may be a single parent and trying to make the rent or feed the kids. They are messing with people’s survival and I don’t think they care! Like me being able to survive with -$110 for income in August. It’s a nightmare. It’s a a valid argument for those of us who can to live way below your means. And for those of us who cannot, hopefully you have a strong family network or lots of friends, or a strong church network. Or take any job you can get, hang the unemployment.
I may be telling you soemthing you already know only too well, but this US News article on work and SS might help
http://news.yahoo.com/s/usnews/20100920/ts_usnews/howworkimpactssocialsecuritybenefits
Phew, well aren’t we lucky these idiots are going to be in charge of our health care….
and
“Hm. Evan may be right. I could be a closet conservative. Pass the Earl Grey, please.”
I’ll buy you a box if you just admit it!