Paying FICA after age 70

[Alan]

Background

I retired early at age 55 in 2020 and as well as receiving a regular DB pension reported each year on a 1099-R I also receive a non-qualified pension reported each year on a W-2. I pay Louisiana State tax each year because I receive W-2 payments.

I have just received a letter from HR that starting on January 1st I will also be paying FICA taxes of 6.2% and 1.45%. This is per Inland Revenue code 3101 on non qualified special arrangements.

The pension is around $20k so it will be ~$1.5k/year payroll tax. I'm guessing that I have probably escaped this tax for 10 years now so I'm not complaining.

I have 23 years of SS contributions and plan to claim at age 70 which will now mean that I will have 28 years of contributions. My SS is going to be reduced due to WEP so that extra 5 years of contributions should reduce that a lot.

Questions I'm looking for answers to

1) If I delay claiming SS until age 72 will that eliminate WEP all together? (i.e. does working (W-2 income) after age 70 still build up SS benefits?)

2) I turn 65 in 2020 and will be signing up only for Medicare Part A as I live in England. Will I continue to pay the Medicare portion of FICA (1.45%) after age 65? Anyone here working over age 65 and still paying Medicare FICA?

 

[davebarnes]

I am confused.
1. "Inland revenue". QE2's government is involved in US taxes?

I am not confused.
1. FICA is no longer called FICA. Your W2 now says: "SS taxes collected" and "Medicare tax collected".
2. "does working (W-2 income) after age 70 still build up SS benefits?" Yes, but not really. The amounts are very small.
3. When you are still alive at 140 and collecting W2 income, you will still be paying SS and Medicare taxes. Age has nothing to do with paying taxes.

 

[youbet]

1) If I delay claiming SS until age 72 will that eliminate WEP all together? (i.e. does working (W-2 income) after age 70 still build up SS benefits?)

WEP is not directly related to the age at which you begin collecting SS. It is related to the "years of creditable earnings" you have. There is a worksheet on the SS site you can use to estimate what your SS will be with WEP taken into account.

2) I turn 65 in 2020 and will be signing up only for Medicare Part A as I live in England. Will I continue to pay the Medicare portion of FICA (1.45%) after age 65? Anyone here working over age 65 and still paying Medicare FICA?

This is just my guess. The Medicare payroll tax is a tax on earned income to fund Medicare, not to build a specific account for you. Therefore, again just a guess, I think you'll continue to pay it.

 

[MissMolly]

I have earned both 1099 and W-2 income this year and I am over 65. I have to pay Medicare taxes and SS taxes on all of it.

I am not clear why you would delay claiming SS after age 70. It doesn't increase beyond that date. If you had really, really substantial earnings, I could see where it would make a small difference in your SS payment, but SS will adjust each year going forward as needed for any additional earnings.

 

[Alan]

I am confused.
1. "Inland revenue". QE2's government is involved in US taxes?

Nothing to do with QE2’s government. The taxing authority there is HMRC.

IRS stands for “Inland Revenue Service” and is the USA equivalent of HMRC.

I’ve attached the letter for clarity.

 

[Alan]

WEP is not directly related to the age at which you begin collecting SS. It is related to the "years of creditable earnings" you have. There is a worksheet on the SS site you can use to estimate what your SS will be with WEP taken into account.

This is just my guess. The Medicare payroll tax is a tax on earned income to fund Medicare, not to build a specific account for you. Therefore, again just a guess, I think you'll continue to pay it.

I have earned both 1099 and W-2 income this year and I am over 65. I have to pay Medicare taxes and SS taxes on all of it.

I am not clear why you would delay claiming SS after age 70. It doesn't increase beyond that date. If you had really, really substantial earnings, I could see where it would make a small difference in your SS payment, but SS will adjust each year going forward as needed for any additional earnings.

Good information guys, thanks for that.

I should have explained WEP, the Windfall Elimination Provision, which decreases SS if one has other pensions such as foreign pensions that never paid into SS. As I said above I currently have 23 years of SS contributions.

The amount that WEP decreases SS is at a maximum at 20 years of SS contributions and reduces down to zero after 30 years of contributions. Since I might well be paying FICA after age 70 then at age 72 I will have 30 years of contributions.

 

[youbet]

reduces down to zero after 30 years of contributions. Since I might well be paying FICA after age 70 then at age 72 I will have 30 years of contributions.

Your contributions need to be over a minimum amount for a year to count as one of the 30 years. Yours likely are, but you might want to check.

 

[Alan]

Your contributions need to be over a minimum amount for a year to count as one of the 30 years. Yours likely are, but you might want to check.

Gotcha, I will certainly do that. Thanks.

 

[ronin]

You don't need to delay claiming SS until 72. WEP will be automatically recalculated for any additional years of substantial earnings as they accrue.

https://maximizemysocialsecurity.com/if-i-continue-working-past-age-70-can-i-earn-additional-years-offset-my-wep-penalty

 

[cathy63]

Nothing to do with QE2’s government. The taxing authority there is HMRC.

IRS stands for “Inland Revenue Service” and is the USA equivalent of HMRC.

I’ve attached the letter for clarity.

IRS = Internal Revenue Service, not Inland

"Inland Revenue" used to be the name for the UK's taxing authority. Per Wikipedia "The Inland Revenue was merged with HM Customs and Excise to form HM Revenue and Customs which came into existence on 18 April 2005."

(Sorry for just posting to be pedantic, but I think your actual questions are mostly answered.)

 

[Alan]

You don't need to delay claiming SS until 72. WEP will be automatically recalculated for any additional years of substantial earnings as they accrue.

https://maximizemysocialsecurity.com/if-i-continue-working-past-age-70-can-i-earn-additional-years-offset-my-wep-penalty

Brilliant, thanks for that.

 

[Alan]

IRS = Internal Revenue Service, not Inland

"Inland Revenue" used to be the name for the UK's taxing authority. Per Wikipedia "The Inland Revenue was merged with HM Customs and Excise to form HM Revenue and Customs which came into existence on 18 April 2005."

(Sorry for just posting to be pedantic, but I think your actual questions are mostly answered.)

Thanks for the correction. Obviously something was lurking in my brain, I hadn’t noticed that it had changed its name during the 30 years I was away