SSA Nightmare-Comingled with Enormous Unpaid SE taxes-Very Unusual Set of Facts

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  • #13440
    Bryan Haarlander
    Participant

    TP calls and says that when he applied for his SS benefits, he was told that he had no benefits. To the surprise of TP, he was told by SSA that he never had any SS wages. TP said that is impossible as he was SE for over 10 years. The story: TP decided to prepare his own tax returns, did not include his SE on Sch C, and reported his net earnings from SE on the wage line of Form 1040. How the IRS accepted his returns as wages without a W-2 is unknown.

    The tax years are well beyond the SOL. While the IRS will not process these returns due to the SOL, is there any way for the TP to get credits for his SS earnings? I’m not sure how the SSA gets its Sch C income, but would imagine it comes from the IRS.

    Part of me says let sleeping dogs lie. While TP may have foolishly acted so as to lose his SS benefits, even assuming that the IRS would accept the returns beyond the SOL, the tax assessment of unpaid payroll taxes, late payment penalties & interest would be VERY SIGNIFICANT. The tax prep fees to prepare these past tax returns would be costly. Due to the TP’s current financial information, he likely would be OIC eligible.

    Anybody have any SSA experience with this? Before telling the TP we are unable to help him, I want to make sure that there is not some way for the SSA to give him credit for his SE earnings.

    TIA

    #13481
    Eric Green
    Keymaster

    I agree that the years older than three years cannot be amended. If he was self-employed he would have to amend the returns to include the SE Tax on each, and I bet between it, the penalties and the interest, he will owe enough to offset any benefit, but explain this and see if he wants to do the analysis.

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