If you are self-employed and procrastinate filing your personal income tax returns, you not only run the risk of losing a tax refund because your Form 1040 return was filed after the statute of limitations for claiming a refund had expired, but you will also lose social security credits which may impact your social security benefits.
The social security code (42 U.S.C. 405(c)(4)) says you have to report the SE income before the expiration of the “time limitation”. Sec. (c)(4)(C) says if you don’t file by the expiration of the time limitation, then your SE income is zero unless you can show that you filed before the expiration of the time limitation. Sec. (c)(1)(B) says that the “time limitation” is 3 years, 3 months & 15 days.
This limitation does not apply to W-2 earnings because employers report those wages to the Social Security Administration. However, self-employed individuals need to file Sch. SE with their Form 1040 to have their earnings properly reported.
Remember that the “C” in FICA and SECA stands for “contributions”.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
