It is crucial for individuals receiving social security benefits to report their earnings in a timely manner.
Failure to do so can result in penalty deductions imposed on the individual’s benefits. This blog post aims to provide an overview of the rules and regulations governing penalty deductions for failure to report earnings timely as per § 404.453.
- When penalty deductions are imposed:
Penalty deductions are imposed if an individual fails to report their earnings as specified in § 404.452 for a taxable year beginning after 1954, good cause for failure to report does not exist, a deduction is imposed because of their earnings, and they received and accepted any payment of benefits for that year.
- Determining the amount of penalty deduction:
The amount of penalty deduction depends on the number of failures to report earnings timely:
a. First failure: An amount equal to the individual’s benefits for the last month during the taxable year. If the deduction imposed for the year is less than the benefits for the last month, the penalty deduction is equal to the deduction imposed, but not less than $10.
b. Second failure: An amount equal to twice the amount of the individual’s benefits for the last month during the taxable year.
c. Third or subsequent failures: An amount equal to three times the amount of the individual’s benefits for the last month during the taxable year.
- Determining the type of failure:
a. No prior failure: All overdue taxable years are considered as the first failure.
b. Second and subsequent failures: Each taxable year for which a timely report is not made, after one penalty deduction has been imposed, is considered separately.
c. Penalty deductions under § 404.451 are not counted in determining the type of failure.
- Limitations on the amount of penalty deduction:
The amount of penalty deduction for failure to file a timely report of earnings for a taxable year cannot exceed the number of months in that year for which the individual received and accepted a benefit and for which deductions are imposed by reason of their earnings.
Conclusion: It is essential for individuals to understand the importance of timely reporting of earnings to avoid penalty deductions. By being aware of the rules and regulations, they can ensure compliance and minimize potential penalties. If you have questions or concerns about your specific situation, it is always a good idea to consult with a professional for guidance.
https://www.ssa.gov/OP_Home/cfr20/404/404-0453.htm
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