Social Security Overpayments
Overpayments may be created by excess earnings of retired individuals; and, by other situations such as earnings of spouses or children; non-reporting of termination events such as remarriage, non-attendance in secondary schools; return to work for disability recipients; etc.
Retired Individuals under the Full Retirement Age [FRA] [age 65, 6 months for those born in 1940; age 65 and 8 months for those born in 1941; and increasing to age 67 for those born in 1960 or later] receive reduced benefits [20% increasing to 30%] for each month below FRA. They also receive a $1 reduction in benefits for each $2 in earnings above the annual earnings exempt amount [$12,480 for 2006 - amount changes annually]. For example, someone under FRA who earns $18,000 in 2006 will lose $2760 in benefits [$18,000 - 12,480 = 5520/2 = $2760]
The Annual Earnings Exempt Amount for 2006 for those who reach Full Retirement Age [FRA] is $33,240 or $2770 a month [changes annually] and the deduction is $1 for every $3 for the months prior to attaining the FRA. Example, if your birthday is October 1st and you earn $40,000 from January to September, you would lose $2253 in benefits [$40,000 - 33,240 = 6760/3 = $2253].
The Social Security Administration [SSA] encourages you to report excess earnings as soon as possible during the year the income is earned to reduce overpayments. SSA, however, withholds full monthly checks to recover overpayments. For example, if you receive $1000 a month and report an overpayment of $2100.00; SSA will withhold 3 monthly checks or $3000.00. An adjustment will be made after your Annual Report is filed [due by April 15th] or your actual earnings are posted [September or October] to your earnings record. You may not, however, be able to wait 6 months or longer to recover your $900.00!
You have options to the full-month withholding method! For your options on the timing of reporting excess earnings, appealing overpayments and repaying overpayments with less than full-month withholding, please send an email to benefits @ govtbenefits.com