In January 1959 F became entitled on her deceased father's earnings record to child's insurance benefits of $56 per month. Her entitlement to such benefits terminated with the benefit for September 1963 since she attained age 18 in October 1963 and was not then under a disability. Meanwhile, the beneficiary found a job in June 1963 and continued working throughout 1963. She earned wages in excess of $100 in each of the months June through December 1963. F's wages for 1963 were $1,685, of which amount she had earned $951 by September 30. She did not engage in self-employment during the calendar year ending December 31, 1963, her taxable year for income tax purposes.
The Administration made a determination that, because of F's work and earnings, deductions were required by section 203 precluding payment of any benefits for June through September 1963. The beneficiary protested, and contended specifically that in the months of 1963 for which she was entitled to benefits (January-September) she earned less than $1,200 and therefore no deductions are applicable.
As pertinent here, sections 203(b) and (f) of the Social Security Act provide in effect as follows: Deductions from benefits because of a beneficiary's work and earnings in a taxable year must be imposed for any month in that year if he has excess earnings which are chargeable to that month. The amount of the deduction for a month is the amount of excess earnings charged to such month. The excess earnings are charged against his own benefits, and against benefits (if any) to which other persons are entitled on his earnings record. The excess earnings are charged to the first month in the taxable year in the amount of such benefits for that month, or if the excess earnings are less, in the amount of such excess. The remaining excess is then charged to the second month, the third, and so on, until either the total excess has been charged or there are no more months in the year to which the excess may be charged. However, excess earnings are charged, and deductions imposed, only for months of that year in which all the following conditions are met: the working beneficiary is entitled to benefits, is under age 72, and has either rendered substantial services in self-employment or rendered services for (i.e., earned) wages of over $100.
Section 203(f)(3) defines an individual's excess earnings for a taxable year as "his earnings for such year in excess of the product of $100 multiplied by the number of months in such year, except that of the first $500 of such excess (or all of such excess if it is less than $500), an amount equal to one-half thereof shall not be included. The excess earnings as derived under the preceding sentence, if not a multiple of $1, shall be reduced to the next lower multiple of $1." Under section 211(e) of the Act, a person's taxable year for social security purposes is the same as his taxable year for income tax purposes.
In the present case, F had earnings of $1,685 in the 12 months of her taxable year ending December 31, 1963, but contends that her earnings for October, November, and December 1963 (in which months she was not entitled to benefits) should be excluded and she should be considered to have earnings of only $951 for 1963. If her total earnings for 1963 did not in fact exceed $1,200 ($100 times 12, the number of months in her taxable year) she would have no excess earnings for the year and no deductions would be applicable for any month of 1963. However, the computation of a beneficiary's excess earnings, as defined above for purposes of work deductions, is not affected by the fact that his entitlement to benefits terminated before the end of that year. Accordingly, it is held that F's earnings for October, November, and December 1963 cannot be excluded in determining the amount of her excess earnings for 1963, even though her entitlement to benefits ended on September 30, 1963. She therefore has excess earnings for 1963 of $242 (one-half the difference between $1,685 and $1,200 (i.e., $242.50), reduced to the next lower multiple of $1).
F's excess earnings of $242 may be charged against her benefits of $56 per month in the amount of $56 for each of 4 months and in the remaining amount of $18 for a fifth month -- if there are 5 months in 1963 to which excess earnings can be charged, i.e., months in which she was entitled to benefits, was under age 72, and either rendered substantial services in self-employment or earned wages of over $100. However, there were only 4 such months in 1963, June through September, and accordingly, deductions precluding payment of benefits for those months were properly imposed. (Deductions are not applicable for any of the months January-May because F was not self-employed and did not earn wages of more than $100 in any of these months; nor are deductions applicable for any of the months October-December because she was not entitled to benefits for these latter months.)
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