Ask Rusty – Will Paying the IRS Quarterly Increase My Social Security?

Dear Inquisitive: By “pay in quarterly” I assume you mean that your earnings from the church are reported on IRS form 1099 and that you pay quarterly estimated income taxes to the IRS to avoid a penalty when you file your annual taxes. The primary reason to pay quarterly estimated taxes is to avoid an IRS penalty - paying your taxes quarterly doesn’t matter to Social Security because they will use your annual income (regardless of when you pay the IRS) to see if your benefit should be increased. And whether your current income from the church will increase your Social Security benefit depends on your lifetime earnings history of paying into the Social Security program.

The Social Security benefit you’re now receiving is based on your lifetime earnings history, specifically the 35 years over your lifetime in which you had the highest earnings (adjusted for inflation). Social Security always uses a 35 year window to compute your benefit amount, choosing the highest earning years from among all your earning years. If you have fewer than a full 35 years of earnings, they will add enough “zero” years to make it 35 to compute your benefit. What that means is that if you have fewer than 35 years of SS-covered earnings, your earnings now from the church will eliminate one of those “zero” earning years, which would result in a small increase to your Social Security benefit. However, if you already have at least 35 years of SS-covered earnings, then your current earnings will only increase your SS benefit if your recent earnings are more than any of those in the 35 inflation-adjusted years used to compute your age 70 benefit. Social Security will make that determination whether you pay quarterly estimated income taxes to the IRS or not, and they will automatically increase your monthly benefit if your current annual earnings from the church call for it.

How you pay the IRS won’t factor into Social Security’s determination, but not paying estimated taxes quarterly may affect your total income tax obligation for the tax year, which is what your accountant should be able to tell you. And if your tax return is filed as a self-employed taxpayer, you’ll need to pay into Social Security via self-employment taxes, whether you pay the IRS quarterly or not.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.