What if you do not have enough credits to qualify for medicare or social security

What If I Haven’t Worked Long Enough to Qualify for Medicare or Social Security?   By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!


Dedicated To Shari’s best friend!


You are 65 years of age  on January  7th and you are 3 credits short of having the 40 credits needed for medicare.  You have high medical expenses.   Medicare would be a real relief!!


You have a cash basis business or manage real estate and every year, you just hate paying taxes so what do you do?


Most years, you have prepaid expenses for the next year by paying these expenses in the current year to wipe out taxable income for a sole proprietorship.  Or you use a partnership or S corporation and fail to pay yourself any or enough guaranteed payments or payroll to guaranty for a quarterly credit towards the 40 credits you need for medicare and then for social security.


You saved taxes but now you are paying the price  and in the long run you will pay tons of medical expenses because you do not qualify for medicare!!


What can you do to fix the problem before 12-31-13 when it could be too late?


If you own a S corporation, you would go back and file and pay in quarterly payroll of $1,160 each quarter for 2013. Yes, you will have a penalty for late filing of the reports and the payroll taxes. But it is worth the amount of the penalty.   I would round up to $1,200 because pigs live but hogs get slaughtered.  It looks quite fishy and could raise a red flag to pay exactly what you needed to pay to get the credit.  Maybe you want to pay more than $1,200 per quarter.  What is important to remember is if you just pay $4640 in one quarter, you only get 1 credit, not the 4 credits you need!


You will need to get 941, 940 and state payroll reports and pay the taxes in immediately with the reports to reduce penalties. 


If you pay yourself the payroll through an S corporation or partnership (yes, I know you really should not pay yourself a payroll check through the partnership because you are not considered an employee.  The reality is that partners do pay themselves payroll and withhold taxes.).


If you have a partnership or sole proprietorship (schedule C), you are going to need to file a quick return by December 31st and pay the tax owed so you can go down to medicare and show them that you indeed have paid in for the 4 quarters of 2013 and qualify for medicare. 


You are going to want to efile if you can because Medicare is going to need to see that you filed and paid the tax and if you file by paper, it could take months until Medicare can get a copy of your 2013 tax return. 


Yes, I understand you do not have everything you need to file your personal returns.  So, big deal, you simply amend your returns later.  I have never seen once in 40 years an amended tax return trigger an IRS audit.


Let us say that the above steps do not work for you and you are still short those 3 credits.


You will not qualify for  Medicare Part A (hospital insurance) but you most likely will qualify for Medicare Part B (which covers doctors’ services, outpatient care and medical equipment) and for Part D (prescription drug coverage) because these have nothing to do with how long you’ve worked.


Normally, you need to have earned about 40 “credits” or “quarters” by paying Social Security and Medicare payroll taxes while working — equal to about 10 years of work — in order to get Part A services without paying premiums. The premiums have already been covered by your payroll taxes.

However, if you don’t have enough credits you may qualify for premium- free Part A services on the work record of your spouse, provided that you are 65 or older and your spouse is at least 62.


What can you do? \ If you’re 65 or older, you can buy into Medicare by paying monthly premiums for Part A hospital insurance. You can also join Part B and pay the same premiums as other people. In both cases, you must be a U.S. citizen or a legal resident (green card holder) who has lived in the United States continuously for at least five years.


The amount you pay for the Part A premium in 2013 is $243 a month (if you have 30 to 39 work credits) or $441 a month (if you have fewer than 30 work credits). These amounts usually increase each year. If you continue working until you’ve earned 40 credits (about 10 years’ work in total), you’ll no longer be required to pay Part A premiums.



Did you know If you buy Part A, you must also enroll in Part B?  But you can enroll in Part B without having Part A.


You can get Part D prescription drug coverage if you’re enrolled in Part A or Part B.


To join a private Medicare Advantage plan or to buy Medigap supplemental insurance, you must have Part A and Part B.

ALERT: What could go wrong? If you don’t enroll in Part B when you’re supposed to, you risk having to pay a permanent late penalty when you finally sign up, even if you haven’t worked long enough to qualify for Part A without paying a premium for it.


If you enjoyed this article, please consider sharing it!
Icon Icon Icon


No Obligation FREE Evaluation: Guaranteed to Reduce Your Taxes






About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

Get In Touch

JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com