Good afternoon, I am 71 years of age and have 36 credits toward Social Security.

I worked this year and gross pay was $2997, and made $812 in cash tips for a total of $3809. Tourist industry driving jeeps.

Each credit requires $1320. Can I use my tip Money as earnings? If I am correct and can use tip money toward earnings I would need to earn appox $1471 more to get the total credits?

If this is correct and I earn the $1471, do I have to wait until I submit income tax returns in 2019 or can I take documentation to SSA prior to that time and apply for SSA?

Thank you

  • It is unusual for a 71-year old to have accumulated only 36 quarters of credit. Has the OP been employed by a State that does not participate in Social Security, and is (or will be) receiving retirement benefits from that Stat?. If so, it should be remembered that the Windfall Elimination Provision reduces the Social Security benefit that the taxpayer receives based on his/her employment record and payments into the Social Security system, while the Government Pension Offset provision reduces the SS benefit that the OP can claim as a spousal benefit based on the spouse's employment record. – Dilip Sarwate Jun 21 '18 at 15:50

For US tax purposes tips must be included in earned income. This is not an option you choose. This means you must pay Social Security and Medicare taxes on them (for SS only up to the yearly cap, but that doesn't matter for you) and you get credits accordingly. You must also include them in computing income tax, but if your total income is under the threshhold amount (raised to $12k for single this year by TCJA) your income tax is zero. And you must pay Additional Medicare Tax on earned income over $200k single, but that isn't an issue for you.

See IRS publication 531 Reporting Tip Income (version on website is still for 2017; most pubs and forms for 2018 won't come out until about November, but only some details will change). The normal method is that you report your tips to your employer at least monthly; they withhold as needed (computed the same way as for wages), and next January they include this amount in your W-2 which is filed with SSA and you get credits for the year accordingly. (You will likely file your income tax return at almost the same time, but it doesn't matter if you don't.)

If you fail to report to your employer, or they fail to withhold the needed amounts (per your W-2), there are specific sections on that. These you do add to your income tax return, and IRS relays the relevant information to SSA. (This is similar to self-employed people, who file Schedule SE with their income tax return and IRS relays their SS and Medicare taxes and earnings to SSA.)

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