I have 17 years of soc sec substantial earnings. I turn 64 in April. I retired and am drawing a public pension subject to windfall elimination. I have farmland with CRP payments of $2600 a year. Can I use the CRP payments and use the farm option method for reporting self employment income to obtain several more years of “substantial earnings” to decrease my windfall penalty percentage. I know it does not start to decrease until I have a least 3 more years of substantial earnings. Is this something I should explore? What if I start drawing soc. Sec. in 2 years. At full retirement. Will that Change this plan?

Hi,

I'm not an expert on tax rules, but according to the following IRS website CRP payments are subject to self-employment taxes unless the recipient is receiving Social Security retirement or disability benefits: https://www.irs.gov/businesses/small-businesses-self-employed/conservati.... Therefore, it sounds like your CRP payments would count as self-employment earnings until you claim your Social Security benefits. Again, though, my expertise is limited to Social Security, so you'll need to check with the IRS to be sure.

However, the annual amount considered as 'substantial earnings' is much higher than the $2600 you refer to receiving from CRP payments. For example, in 2019 you must have earnings of at least $24,675 for it to count as a substantial earnings year for purposes of the Windfall Elimination Provision (WEP) provision (https://www.ssa.gov/pubs/EN-05-10045.pdf). So, unless you have other earnings in addition to the $2600 annual CRP payment, it won't help you meet the substantial earnings exception to WEP regardless of whether or not you're required to pay self-employment taxes on the CRP payments.

You may want to strongly consider using our software to do your Social Security planning. The software is fully programmed to handle WEP computations, and you can input projected future years of earnings in order to determine what effect they would have on your benefit rate.

Best, Jerry