Strange Question

[taxtrio]

Strange question from a client today...

He has a C-corp that has had no income since 2002.

He got his Social Security Earnings Statement recently and has been concerned that it shows he no longer qualifies for Soc Sec Disability. Has not had any "earnings subject to soc sec/se" in a number of years.

He has been living off of money from house sold.

This is his "question". Can he hire his own corporation to do repairs on his personal home, and pay the corporation out of his personal funds. Then the corporation will "hire" him to do the work on his own home. This will create "earned income subject to soc sec/se". He figures this will allow him to earn more credit with soc sec.

I told him I didn't think the IRS would like his "scheme".

Sounds like taking money from your left pocket and putting it in your right pocket to created a tax

liability!

Your thoughts are appreciated...

[Pacun]

If you want to put "him to work", just open schedule C have some "sales" and no expenses and pay federal, ss, and state taxes on that amount and no one will question you.

[lbbwest]

Gee, and all I usually read about SS on these boards is how to avoid it. In the past when I brought up situations like the one your client is encountering the knee jerk reactions about how stupid it is to pay Soc Sec and Medicare are thundering. If your client had paid into the system accordingly, he wouldn't have to be committing fraud now. What is the difference between falsifying income figures to qualify for social security and falsifying income figures for EIC? They are both entitlements, which according to this board most of you want to get rid of. If he wants to claim more income tell him to earn it. lbb

[jainen]

>>In the past when I brought up situations like the one your client is encountering<<

I have also mentioned that getting Social Security credits is one of the planning issues for self-employment. However, this particular case sounds bogus. Notice that he isn't concerned about retirement, but disability benefits. For someone who chooses to not work, this is pretty suspicious.

[redux]

>>In the past when I brought up situations like the one your client is encountering<<

I have also mentioned that getting Social Security credits is one of the planning issues for self-employment. However, this particular case sounds bogus. Notice that he isn't concerned about retirement, but disability benefits. For someone who chooses to not work, this is pretty suspicious.

This is scary, I agree with jainen on this one. I think this scheme would flop and not only would he still have no SS he (and likely YOU) would be in further trouble for designing such a scheme.

I also think it is so revealing that this "client" couldn't give a whip about contributing to the SS "system" until he realizes that his lack of contributions affects nearly no one but him...now he's REALLY interested in "doing the right thing."

[Pacun]

Send this crook the same way he came. Don't get involved at all. I didn't pay attention to the disability portion of it, he might have a foot in jail already.

[taxtrio]

Send this crook the same way he came. Don't get involved at all. I didn't pay attention to the disability portion of it, he might have a foot in jail already.

Just to clarify, he did work for the majority of his lifetime. He has enough credits for retirement already. He had bad family troubles, and it threw him for loop for a number of years, and he has been living on his investments and savings.

I agree his scheme is just as wrong as a person "fabricating" self-employment income to get an EIC. He's just afraid if he were to become worse off physically, that he has lost the benefit of all the money he has paid in to social security in the past.

I think it is unfair that a person that has paid in all his life, and then doesn't work for a few years-- then looses the disability benefit he has paid for all his life.

BUT, like I told him.... the IRS would not go for his scheme. Just thought I would share the craziness with the rest of you.

[redux]

Just to clarify, he did work for the majority of his lifetime. He has enough credits for retirement already. He had bad family troubles, and it threw him for loop for a number of years, and he has been living on his investments and savings.

I agree his scheme is just as wrong as a person "fabricating" self-employment income to get an EIC. He's just afraid if he were to become worse off physically, that he has lost the benefit of all the money he has paid in to social security in the past.

I think it is unfair that a person that has paid in all his life, and then doesn't work for a few years-- then looses the disability benefit he has paid for all his life.

BUT, like I told him.... the IRS would not go for his scheme. Just thought I would share the craziness with the rest of you.

I don't think anyone was questioning your integrity, at least I wasn't. Thanks for sharing.

[jainen]

>>the disability benefit he has paid for all his life<<

He didn't pay for it "all his life." The eligibility period is only ten years, and the deal is that if you aren't working anyway, you can't claim to be unable to work. Are you saying that it is unfair that he didn't get to use his coverage because he never got disabled?

The rules have been in place since long before he was born. He chose to drop out of Social Security coverage, and could just as easily have chosen to obtain a private policy. He could even have done so as a tax-free benefit through his corporation! He can still do that--what exactly is his problem?

[lbbwest]

Work credits for disability benefits

The number of work credits needed for disability benefits depend on your age when you become disabled. Generally you need 40 credits, 20 of which were earned in the last 10 years ending with the year you become disabled. However, younger workers may qualify with fewer credits.

The rules are as follows:

Before age 24--You may qualify if you have 6 credits earned in the 3-year period ending when your disability starts.

Age 24 to 31--You may qualify if you have credit for working half the time between age 21 and the time you become disabled. For example, if you become disabled at age 27, you would need credit for 3 years of work (12 credits) out of the past 6 years (between ages 21 and 27).

Age 31 or older--In general, you need to have the number of work credits shown in the chart below. Unless you are blind, you must have earned at least 20 of the credits in the 10 years immediately before you became disabled.

Born after 1929, Became Disabled At Age: Number of Credits You Need:

31 through 42 20

44 22

46 24

48 26

50 28

52 30

54 32

56 34

58 36

60 38

62 or older 40

[lbbwest]

Amount of earnings needed to earn one quarter of coverage Year Earnings

1975 $50

1976 50

1977 50

1978 250

1979 260

1980 290

1981 310

1982 340

1983 370

1984 390

1985 410

1986 440

1987 460

1988 470

1989 500

Year Earnings

1990 $520

1991 540

1992 570

1993 590

1994 620

1995 630

1996 640

1997 670

1998 700

1999 740

2000 780

2001 830

2002 870

2003 890

2004 900

Year Earnings

2005 $920

2006 970

2007 1,000

[lbbwest]

I cut and pasted from the Social Security website the two separately, because I didn't have time to make a "page" . Look at those numbers...methinks something is rotten in the State of ???? Something is not making sense here.