AARP Hearing Center
If you are a contracted worker or otherwise self-employed and don't report all of your income and pay quarterly estimated taxes and self-employment tax, you may get a lower Social Security retirement benefit when the time comes to collect.
"Benefits are based on your lifetime earnings, so they could be a lot less, or none,” says Lydia Chevere, a Social Security Administration (SSA) spokesperson. “It depends on what you report.”
![member card Image Alt Attribute](https://cdn.aarp.net/content/dam/experience-fragments/uxdia-folder-structure/en/features/membership/inline-membership-promo/default/master5/_jcr_content/root/responsivegrid/container_copy/container/articleimage.coreimg.75.1140.png/content/dam/uxdia/membership-card-d-and-t.png)
LIMITED TIME OFFER: Labor Day Sale!
Join AARP for just $9 per year with a 5-year membership and get a FREE Gift!
Your retirement benefits are calculated based on the 35 years you earned the most money, so if you leave out income or you report zero or lower, those earnings — or lack of — may become part of the overall calculation.
Some self-employed individuals aren't aware of their tax obligations. “There's a lot that goes into (being self-employed) from a tax perspective,” says Andy Phillips, director of the Tax Institute, H&R Block, a tax preparation firm.
In fact, research shows that many so-called “gig” or on-demand workers don't know what's required when it comes to their taxes.
"Research on the tax compliance of on-demand platform workers found that more than one-third of respondents did not know whether they were required to file quarterly estimated payments on the income they earned,” says a 2019 report from the Center for Retirement Research at Boston College.
Some aren't paying self-employment tax, either, which includes a total of 15.3 percent of their net earnings.
For ways to save and more, get AARP’s monthly Money newsletter.
If you're self-employed, you are required to pay both the employee and employer amount, which is a 12.4 percent Social Security tax on up to $132,900 of your net earnings and a 2.9 percent Medicare tax on all your net earnings.