Points, better known as credits, are calculated…

by: Mohammad Hafiz

Points, better known as credits, are calculated by the Social Security Administration for each taxpayer, including self-employed persons, based on yearly earnings. Once a taxpayer achieves a minimum number of total credits, he can access his earned Social Security benefits. Self-employed persons can earn enough points to access Social Security retirement and disability and leave survivorship benefits to loved ones. The number of credits required to access these benefits varies per type of benefit. Self-employed persons between the ages of 31 and 42 can collect disability benefits with 20 total credits and retirement benefits with 40 total credits. Earn enough points per year to build your Social Security nest egg. if

}StepEarn at least the minimum total gross income required to earn up to four credits per year. Between one and four points are given based on a minimum amount of total earnings per year. Each year this amount changes. In 2010, the minimum total gross income that had to be reported on federal taxes to earn one Social Security point was $1,120. The minimum income required to earn the maximum four credits was $4,480.StepFile federal self-employment taxes each year. Self-employed persons can only gain Social Security credits based on filed federal tax forms each year. Some common tax forms required for self-employed persons may include a 1040, 1040 Schedule SE (Self Employed) and Schedule C (Profit or Loss from Business).StepCalculate the total number of credits earned overall and the total number of credits required to have earned your Social Security benefits. For example, suppose that over the course of your working life, you have earned eight Social Security credits according to your Social Security statement. According to Social Security, you need 40 credits to earn full retirement benefits, and if you are between age 31 and 42, you need 20 credits to earn your disability benefits. Based on earning four credits per year, you have eight more years of working required (if you earn four benefits per year) before you can collect retirement benefits and three more years of working before you can collect disability.

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