Home |IRS Tax Return | Is it advisable for my 68-year-old retired mother in Virginia, who only has Social Security as income, to take up gig work for additional earnings while staying below the income threshold to minimize taxes? Should we consider filing IRS taxes quarterly, and does Social Security count towards this threshold?

Is it advisable for my 68-year-old retired mother in Virginia, who only has Social Security as income, to take up gig work for additional earnings while staying below the income threshold to minimize taxes? Should we consider filing IRS taxes quarterly, and does Social Security count towards this threshold?

Robert James, 20+ years of experience in IRS matters
Answered on September 20,2023

People who do gig work have to calculate at least two taxes: Self-employment tax, which is their contribution to Social Security and Medicare, and income taxes.

There is no standard deduction for SE tax - it's owed once someone makes a Net Profit of about $430 or more from gig work. Net Profit is the total income minus allowed expenses. For example someone driving for Uber eats might have a lot of gross income and also a lot of expenses for their car, so their Net income may or may not be that much. Social Security income won't affect the SE tax calculation.

Because your friend is on Social Security, calculating her taxable income is a bit more complicated. To see if any of the SS income is taxable, you take 1/2 of the SS income and add that to any other income, like Net Profit from Self-employment. If she's single and that amount is more than $25k, she'll probably have to include 50% of her Social Security income in taxable income. It varies depending on filing status.

Income Taxes And Your Social Security Benefit

If she cannot make more than $15k without owing taxes on Social Security, let's say that she does gig work and her Net Profit is $10k. She won't owe any federal income taxes, because her total income is below the Standard deduction, but she'll owe about $1413 just for SE taxes. It's a little over 14% of Net income.

She would pay less taxes overall if she works at a W-2 job and keeps her total income under whatever amount necessary to avoid owing taxes on any Social Security. Employees only pay 7.65% for Social Security and Medicare, plus some minor things like workers compensation etc.

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