You probably know that your Social Security benefit is based on your average indexed monthly earnings (AIME) during your 35 highest-earning years and that the government uses your tax returns to determine your income for each year of your working life. What you probably don't know is that the Social Security Administration (SSA) makes mistakes, and if you're not careful, you could end up paying the price.
Since the program began in 1937, until 2012 -- which is the most recent data is available -- $1.2 trillion in uncredited wages has ended up in the SSA's Earnings Suspense File (ESF). This is where it puts all the Form W-2s that it can't attach to anyone's earnings record. And if any of that money is yours, your Social Security earnings record could show low or no income for the year. That could dock your average Social Security benefit by up to $100 per month, according to the SSA. Over 20 years, that adds up to $24,000 in lost benefits. Ouch! Fortunately, there is an easy way to check your earnings record and to remedy any mistakes. Here's how to do it.
What causes Social Security earnings record mistakes?
You may be wondering how the SSA could possibly get your earnings record wrong. It's part of the government, after all. It has access to your tax returns. But things like clerical and mechanical errors or mistakes on your tax return could cause the SSA to miss some of your income.
Between 2008 and 2012, 95% of W-2s that ended up in the ESF wound up there because of a discrepancy between the name or Social Security Number taxpayers submitted and the one the SSA had on file. Of the remaining 5%, 3% were assigned a special indicator code because the individual disclaimed the wages, died, or appeared to be a minor child. The final 2% gave invalid Social Security Numbers that resembled Individual Taxpayer Identification Numbers.
How do I know if my Social Security earnings record is correct?
While 98% of W-2s are processed every year without issue, it's better to be safe than sorry. You can check your Social Security earnings record by creating a my Social Security account. This will also help you estimate the size of your Social Security checks in retirement.
Navigate to the Earnings Record page and verify that the information listed there is the same as the information listed on your tax return for that year. If you notice any discrepancies, especially a zero for a year you earned money, that could mean the Social Security Administration made a mistake with your earnings record.
Check your earnings record at least once per year to make sure the information listed there is accurate. Don't throw away any tax paperwork proving your income for that year until you're sure your earnings record is correct. This shouldn't be an issue for most people, since you're supposed to hold onto your tax returns for at least three years anyway. If you want to be extra cautious, though, you can hold onto them for longer.
How do I correct a Social Security earnings record error?
If you notice an error in your Social Security earnings record, fill out the Request for Corrections of Earnings Record form and submit it to the SSA, along with documentation to prove your income for the year. This can include copies of W-2s, tax returns, or a written statement from your employer. Once the SSA has received your request, it will look over the paperwork and make the changes to your earnings record if it decides your claim is valid.
Don't hesitate to file your request, because in most cases, you only have three years, three months, and 15 days after the year you earned the income to request a correction to your earnings record. After that time is up, you may still be able to request an earnings record change if you meet one of the special circumstances, which include an earnings record entry entered fraudulently, earnings credited to the wrong person, or mechanical or clerical errors. Here's the full list of exceptions.
It's unlikely that the SSA will make a mistake with your earnings record, but it's not impossible. Take some time to check your Social Security earnings record once a year. If you do spot an error, correcting it could save you thousands of dollars in Social Security benefits over your lifetime.