Dear Larry,
I took early retirement this year and moved with my wife and three children below age-18 to Spain. Our combined benefits of around $3,600 monthly cover more living costs here than they ever could in the US, but I do need a bit more income to support my family. We have no intention of moving back to the states. The SSA case worker told me about an income test of $16,920 annually when I first started receiving benefit payments. However, I've recently come to understand this test will not apply to me since my self-employment earnings will be in a foreign country. Instead, I am now subject to something called the Foreign Work Test (FWT), which only allows 45 hours a month of work and theoretically does not at all consider whatever amount I am paid. I am a marketing consultant for the wine industry. The additional income I need after benefits payment could easily be generated through 45 hours of freelance work per month. But apparently the FWT creates other hurdles not related to actual work undertaken. For example, it does not allow me to "make myself available" for client work other than on clearly specified days of the week or month. These days must be mentioned clearly in all promotional vehicles, including my website. So if I do offer my services at the client's convenience, even if my actual hours worked are less than 45 per month, SSA considers this a failure of the FWT test, since my potential work hours are unlimited and I've therefore made my services available for more than 45 hours per month. All of this seems crazy! First, why talk about a 45-hour rule when the SSA is in fact basing compliance on limiting my days of work per month? Second, in this day and age, who offers services every Monday of the week, or advertises such a policy on their website? My more substantive question for you is, as a practical matter, how does SSA go about ensuring compliance with such a ridiculous policy? Do they look for issues in my IRS filings? Do they flag high foreign tax filings for audit? Do they check freelancers' websites? In other words, what is their enforcement mechanism other than threatening communications about reporting any change in employment or income? And whatever enforcement they attempt, are there any things I can do to build a case for good-faith compliance, for example with reasonable wording on my website? Something that would satisfy SSA should they ever come after me, but not make me look silly to potential clients (ideally, “fine print”)? I hope this note does not seem inappropriate. If you cannot help me, can you recommend someone who specializes in this area and could provide an hour of paid consultation? Thank you so much for whatever perspective you are able to offer.
Sincerely,
Joseph

Hi Joseph,

As unfair as the foreign work test rules may seem to you and me, it sounds like your understanding of the rules is spot on (https://secure.ssa.gov/poms.nsf/lnx/0302605005).

Social Security generally accepts a person's allegation as to their hours of work, although if they suspect fraud they could refer your case to the Office of Inspector General (OIG). So, regardless of the chances of being caught, I wouldn't recommend lying about your work activity since that could result in legal problems.

Best, Jerry