What Constitutes “Income” for the Earnings Test?

Debbie HatchBlog, Federal Retirement, Social Security8 Comments

Pinacle Personnel Services LLC  |  Debbie Hatch

 

If you retire from the federal government, prior to age 62 and under the Federal Employees Retirement System (FERS), you are eligible to receive the FERS Annuity Supplement. If you are 62 or older, and have amassed at least 40 credits, you are eligible to receive Social Security retirement.
These benefits have an annual earnings limit though. If you make more than $17,040 in 2018, for every $2 you earn, $1 will be subtracted from next year’s benefits.
 
One question that comes up in almost every retirement class is, “What constitutes ‘income’?”  
 
As is frequently the case, it’s an “easy question” with a slightly more complicated answer.  
FERS SUPPLEMENT:  The Office of Personnel Management’s form RI 92-22 defines “earnings” for the FERS Annuity Supplement. Long story short, “Regardless of what income is called or who receives it, if it is actually wages for services you performed or net earnings from self-employment you secured, it must be included in applying the earnings test.”
 
SOCIAL SECURITY RETIREMENT:  Social Security rules are, of course, very similar. Here’s a link to the Social Security Handbook that defines earnings which must be reported. 

I publish a Question from the Classroom, every Monday.  If you have questions about retirement, financial literacy, the Thrift Savings Program, Social Security, Medicare, or any of the slate of federal insurances, send me a message.  I’d love to hear your questions.

8 Comments on “What Constitutes “Income” for the Earnings Test?”

  1. If I retire 31 Dec 2021, when will I get my first FERS supplement “earnings test” questionnaire?

    1. If you retire on 31 December 2021, you would receive the Supplement through 2022. You would report your taxable earnings (not including retirement income but wages from a job) on an RI 92-22 in the spring of 2023. The earnings reduction is applied annually in July for earnings during the previous year. At that point, the supplement is reduced $1 for every $2 earned above the annual limit.

  2. I am also in this same scenario where I’ve been receiving SRS beginning in late 11/2018 to the present. I understand I must fill out an earnings test questionnaire in spring of 2020 for earnings received in 2019.
    How do I report rental income from real estate if the instructions indicate “not ” to include as earnings “rentals from real estate?” This is very confusing…….any input on this matter would be appreciated.

    1. I agree. It’s confusing. The RI 92-22 instructions state “Complete and return this form IF your allowable earnings were more than $17,640 OR IF your FERS Annuity Supplement was reduced in a previous year.” Look at your federal income tax form from last year. Report the line that says “Wages, Salaries, Tips, etc” if you’re required to report. On the 1040, it’s line 1 and you can look at it here: https://www.irs.gov/pub/irs-pdf/f1040.pdf

  3. If my earnings are under the $17,640 2019 limit, do I still enter the amount on lIne #4 of form RI 92-22?

    1. It’s so confusing, Tom, right? Really convoluted. The first line of the RI 92-22 though says, “Complete and return this form IF your allowable earnings were more than $17,640 OR IF your FERS Annuity Supplement was reduced in a previous year.” IF your Supplement was reduced in 2018, report the following income (even if under $17,040) on line 4.

      “All wages from employment covered by social security. All cash pay for agricultural work, domestic work in a private home, service not in the course of your employer’s trade or business. All pay, cash or non-cash, for work as a home worker for anon-profit organization, no matter the amount. All pay for work not covered by Social Security, if the work is done in the United States.”

  4. I’ turned 56 in Nov. of 2019 retired in Dec. of 2019 and did not work. Now it is May of 2020 and received a form RI 92-22. Do I still have to fill it out or just Ignore it.

    1. Hi Joseph. As you just retired in December 2019, you do not need to complete the form until next May.

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