Advances in medicine and improvements in safety have increased the life expectancy of Americans. People are living longer and staying healthier as they age. This has resulted in a new group of potential workers: people who have retired from their first careers but may not be ready to quit work altogether. Retirees make great employees. They have already proven that they know how to work and have often learned a great deal about how the world works.
Many businesses employ some retirees, especially to fill part-time positions. It is important though that employers understand the IRS rules (which have changed in 2015) for their employees who are receiving Social Security benefits. Current regulations allow Social Security beneficiaries who are under 66 to earn up to $15,720 before benefits are affected. However, any earnings beyond that amount will result in $1 of benefits being withheld for every $2 in earnings. Those beneficiaries turning 66 in 2015 may earn up to $41,880 with earnings above that limit resulting in $1 of benefits withheld for every $3 of earnings. Once workers are 66, they are free to earn any wage without having any effect on their Social Security benefits.
While these rules do not affect the payroll withholding of a business, they most certainly affect the personal finances of a business’s employees. No employer wants an employee to be surprised by the reduction of Social Security benefits that the worker was counting on. It is much better for each employee to be prepared and armed with accurate information so that good decisions can be made.
If you are a small business owner who is doing all the payroll and human resources activities for your business, it might make you a little anxious to think about your role in helping your employees understand the pertinent IRS rules. However, if you have a partner like The Payroll Department, you also have a great resource for your questions. At The Payroll Department, we are experts in IRA regulations and how they affect employers and employees, and we love to help our small business clients understand these effects too. Feel free to call Teresa Ray at (317) 852-2568 and talk with her about the many benefits of working with The Payroll Department.
-Jessica of The Payroll Department Blog Team