I am 62 and will begin to collect Social Security in December. I have an eBay business with gross sales of $7,000 per month. Will all of this count as income and disqualify me from collecting Social Security? Should I make my “Doing Business As” an LLC?
Receiving Social Security benefits and working at the same time is common for many taxpayers. If the taxpayer is younger than their full retirement age, benefits may be limited if earnings are over the threshold. For 2018, the earnings threshold is $17,040 ($1,420 per month). For every $2 over the limit, your benefit would be reduced by $1. If 2018 is the year you reached full retirement age, the limit on earnings in months leading up to full retirement is $3,780 per month. For every $3 over the limit, $1 is deducted from the benefit. As a self-employed individual running an eBay business, your gross sales are not used for the calculation; only your net earnings (income less expenses) count against the earnings limit. One other important thing to note is that if you begin to collect Social Security benefits before your full retirement age, your benefits will be reduced.
A single-member LLC for tax purposes is considered to be a disregarded entity. Whether or not you operate as a formal LLC, the income and expenses would be required to be reported on your personal tax return as income subject to self-employment tax. I cannot give legal advice on the best way to set up your business, as CPAs are not able to practice law. If you have a legal concern about forming your business, you should reach out to your attorney or have your CPA help you find some attorneys that may be able to give you legal advice.
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Answered by: Christopher R. Cicalese, CPA, MSTFP, is a manager at Alloy Silverstein Shapiro Adams Mulford Cicalese Wilson & Co. in Cherry Hill, N.J.