I'm late in my working life, how do I decide if it is a good idea to try to reach 40 credits?

[LouisS564955]

I am 64 years and have earned only 29 credits towards Social Security because I have spent much of my working life in Canada after marrying a Canadian. In 2024, I began earning US 1099 income (plus Canadian income in 2024) which will likely continue for several years. Would it be a good idea financially for me to make the social security deductions starting in 2024 for both employee and employer in order to reach 40 credits? How should I evaluate this decision? The repeal of the WEP clawback is a benefit to me because I have qualified for the Canadian equivalent of Social Security. Thanks!

[LouisS564955 · Accepted solution]

Wow! Thank you for such a high quality response. Please help me a bit more with these follow-up questions:

 - In 2024, I had both Canadian income and US 1099 income, and I am already paying into the Canadian system on the Canadian income. For the US, would I have to pay the Social Security and Medicare taxes on just the 1099 income or on the combined income? 

 - Can I actually go back and refile for previous years if I only had Canadian income in those years but no US 1099 wages? 2024 was my first year with US wage income in many years.

Thank you again for your reply, including all the useful links. 

[GailL1]

@LouisS564955 

YES - and I will be hopefully be able to tell you how to earn even more than that in 2024 - with back filings and the international agreement we have with Canada.

Let’s work backwards - from the 1099 US income earnings.

An independent contractor that receives 1099 reporting of their income is suppose to file and pay their Social Security and Medicare taxes and the matched part just like a self employed person - meaning that you file a Sch C, if need be,  along with a Sch SE (Self employment taxes) along with your 1040 every year that you have this sort of income earnings.  It sounds like you know this so Yes do it for TY 2024.  You can earn at the most (4) quarters every year - based on $1730 per quarter in 2024 and $ 1810 in 2025.

You can NOW also go back and refile up to (3) years and recoup any quarters that you didn’t file for - so that would be for TY 2021, 2022, & 2023.  That is the farthest back you can go to file an amended return. 

This is a chart showing what you had to make to earn a quarter per year, with the maximum earned up to (4) per year.  By doing this, you maybe able to pick up some added quarters for previous years if you did not file this way.  Of course, you have to pay the contributions - both parts - employer and employee.  

SSA.gov - Quarter of Coverage

Now as to your income that you earned in Canada - the US and Canada have an international agreement on retirement benefits since so many US citizens earn Canadian Income and vice versa.  Here is a SSA publication on it.

SSA.gov - International Agreement between the U.S. and Canada 

So if you have some Canadian  credits they could transfer to the US but only if you followed the rules in Canada and paid them.

Some other links for you -

IRS.gov- Independent Contractor (self - employed)  

(see the links on the right side of the page for other info on Independent Contractor filing.

IRS.gov - Self-employment Tax (Social Security and Medicare) 

IRS.gov - Instructions for Sch. SE 

Remember that adding to your quarters earned, you get both credit for Social Security and Medicare.  For Medicare, if you do not have 40 credit when you apply, you will have to pay for Medicare Part A.  It is premium free for those who have (40) quarter credits.  Part A with 29 credits would be $ 285.00 per month in 2025 and it rises usually every year.  Then everybody pays a minimum of $ 185.00 for Part  B, higher for higher income beneficiaries - unless you qualify for Medicaid.  

Good Luck 

[LouisS564955 · Accepted solution]

Wow! Thank you for such a high quality response. Please help me a bit more with these follow-up questions:

 - In 2024, I had both Canadian income and US 1099 income, and I am already paying into the Canadian system on the Canadian income. For the US, would I have to pay the Social Security and Medicare taxes on just the 1099 income or on the combined income? 

 - Can I actually go back and refile for previous years if I only had Canadian income in those years but no US 1099 wages? 2024 was my first year with US wage income in many years.

Thank you again for your reply, including all the useful links. 

[GailL1 · Accepted solution]

@LouisS564955 

The questions you asked are answered on the 1st few pages of the SSA.gov International Agreement publication [Canada] which I gave you the link to in my previous post.

As to how to file - you will use one country or the other - again read the link since I don’t know where you live or details about your work in Canada or the US. see the chart on Page 3 of the publication.

Pick the one where you will get the best benefits or where you do the most of the work or higher salary.  You do have some options especially if the 1099 independent contractor work is not as great as your job pay.

If you need help filing the tax returns - consult a tax prep professional in the Country where you are gonna file.  All the rules of filing are gonna go by that country’s tax prep rules.  I know in the US you can file an amended return back (3) years, I don’t know anything about Canada’s tax filing rules.  

You can get benefits in either country - but you have to file and pay your contributions in one or the other.  Read the publication.

[LouisS564955]

I apologize for not first checking the links you sent. I'm usually much more thorough and considerate! Thank you again for your help. Much appreciated!