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Social Security Work Credits

The Social Security Administration administers many types of benefits offered by the U.S. Federal Government,  such as retirement benefits, disability cash benefits, and survivor cash benefits.   However, to be eligible for many of the Social Security benefits, an individual (or, for some benefits, the individual's spouse or parent) must have enough Quarters of Coverage.   Quarters of Coverage are also commonly referred to as Social Security credits or work credits.   Usually, forty (40) work credits are necessary to be eligible for many of the benefits, but this number can vary depending on the age of the individual and the type of benefit.

Earning Work Credits

In most cases, you earn work credits when payroll taxes (also referred to as Federal Insurance Contributions Act (FICA) taxes)  are taken out of your earnings by your employer.   If you are self-employed, typically you must report at least $400 of net earnings on your income tax returns to be eligible to receive work credits.   Only earnings as an employee or self-employed individual are used to earn work credits.   You can not "buy" Social Security work credits, and another person can not give you their work credits.

However, it is not always enough to work and be paid to earn work credits.   For example, if you work for an employer that does not properly withhold payroll taxes and you do not report the income on your income tax return, then you will not earn work credits.   This will frequently happen if you are working on a cash basis (working "off the books" or "under the table").   Although you may believe that it is to your advantage to avoid the payroll taxes, if you later need Social Security benefits, you may not have the work credits you need when you need Social Security retirement or disability benefits.   In addition, the Internal Revenue Service (IRS) or your State's taxing agency may consider it tax evasion for both you and your employer when your income is not reported.  

There are also some jobs where special rules may apply or where you do not pay into the Social Security system.   Special rules may apply to domestic work, farm work, and work for a church or church-controlled organization that does not pay Social Security taxes.   In addition, some government employees do not pay into the Social Security system.   Usually, government employees in those types of jobs pay into a separate retirement and disability plan specifically for government employees.   If you are unsure if you are paying into the Social Security system, you should contact your employer's payroll or human resources department to check.

If you are self-employed but you are not reporting enough net income on your tax returns, you may be ineligible to receive work credits.   You may save taxes now, but you may create more problems for yourself when you are no longer able to work and Social Security advises you that you do not have enough work credits for Social Security retirement or disability benefits.

Confirming Your Earnings Records

You can confirm what Social Security benefits you are eligible for by reviewing your Social Security Statement.   If you have worked and you are 25 years old or older, you should automatically receive a statement once a year.   You can also request a copy of your Social Security Statement online at www.socialsecurity.gov.

Work Credit Calculations

For 2013, you earn one (1) work credit for each $1,160 of earnings.   A maximum of four (4) credits can be earned each year.   The amount of earnings for each work credit can be changed in future years by the Social Security Administration.   The table below lists the amount of earnings needed to earn one (1) work credit going back to 1978.

Table:  Earnings Per Credit



The information in this article was obtained from the Social Security Administration website at www.socialsecurity.gov.   Information in this article is subject to change at any time by the U.S. Government.

More Information

This article is meant for general information only, and it is not to be construed as legal advice.   If you would like more information about Social Security disability programs, please contact us at 973-347-3347 or disability@norrielaw.com for an evaluation of your case.

First published online: Oct 2010, Last updated: 02/03/2013

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