Message Font: Serif | Sans-Serif
No. of Recommendations: 14
leaving aside the serious issue of misstating one's income on a tax return, I don't see the economic rationale for doing what you suggest.

Earnings from 2011 may never even factor in to the calculation of retirement benefits a person, currently 27 years of age, will ultimately receive. A 27 year old person has at least 40 working years ahead of him. His benefit will be calculated in 2051, and if current rules still apply, will be based on his 35 highest earning years, with income in earlier years adjusted for inflation.

You're suggesting voluntarily (and artificially) increasing tax due and payable in 2011/2012, without a corresponding increase in actual earned income, in order to inflate a reported earnings number that (1) may be excluded in determining SS benfits, (2) may be one of 35 inflation adjusted numbers equally weighted in the formula, or (3) may be of unknowable significance because we have 40 years of possible changes to the way benefits are calculated between now and then.

Consider, instead of inflating reported earned income and paying extra income/wage taxes, putting an amount equal to the additional tax that would have been due into a Roth IRA or other tax advantaged retirement saving account for self-employed persons, and investing it for the 40 years until he becomes SS eligible. If it eventually turns out that his SS benefit is not the max because of relatively low earnings in 2011, he can likely self-fund the difference by drawing down this account.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.