Is It Possible to Rig the Social Security System?


If you are a retired person who relies on Social Security, you may be able to gross up your Social Security income on financial paperwork in some cases. This is done to ensure that your income accurately reflects the equivalent amount of earned income when applying for loans or other financial programs. This is entirely dependent on the third parties with whom you are dealing, but it is not uncommon.

Whether you’re already retired or considering retirement, consulting a financial advisor is a prudent move.

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What Is Making You Sick?

“Grossing up” refers to the process of adjusting someone’s income to reflect the taxes they will pay on it. The term “net income adjustment” refers to the process of adjusting someone’s net income (the amount they receive after taxes) to equal their gross income (the amount they receive on paper). It is frequently used in two distinct contexts. To begin, someone making payments has the potential to “increase” the recipient’s income. In this case, the payer would cover the recipient’s taxes, bringing the recipient’s on-paper income to parity with their actual take-home pay.

As an illustration, suppose Elizabeth earns $80,000 per year. This is her base salary. She would typically earn approximately $59,500 after income and payroll taxes. This is her take-home pay. If Elizabeth’s employer desired to increase her compensation, they could add an additional $20,500 to her annual salary. Elizabeth would earn $80,000 per year gross and $80,000 per year net in this case.

Second, an individual who earns non-taxable income can “gross up” their income by increasing it when applying for financial products such as loans and credit cards. This enables them to present their income in a manner consistent with that of earned income.

Generally, you squander paperwork in order to close a loophole in the financial system.

How Grossing Up Takes Place

The issue here is that the majority of financial products require applicants to disclose their gross, or pretax, income when completing a loan application. This disadvantages individuals with non-taxable income because it artificially reduces their income.

As an illustration, suppose Sam earns $59,500 in non-taxable income each year. Sam’s spending and paying power is equivalent to Elizabeth’s, who earns $80,000 in annual taxable gross income, because both Sam and Liz will have the same take-home pay.


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If Sam applies for a loan, the bank will assume that his pretax income of $59,500 is accurate. They will adjust his income and approve a loan on the basis that he has $49,100 in spending and payment power after taxes. This would be an erroneous representation of Sam’s financial situation.

As a result, Sam’s application may overstate his income. Sam will then file for bankruptcy with $80,000 in “gross up” income on his paperwork. By doing so, he implies that his after-tax earnings are equivalent to someone earning $80,000 in taxable income.

Is It Possible to Increase Social Security Income?

Increasing the value of social security benefits

Social Security is a frequent source of untaxed income. Depending on your household income, you may owe income taxes on 0% to 85% of your Social Security benefits. It is quite common for retirees to pay no income tax on this income. This may cause difficulties for some individuals. On average, retirees receive about $19,370 in Social Security benefits each year. This equates to approximately $23,000 in pretax income for many retirees.

When retirees are required to provide proof of income, they may be able to gross up their Social Security earnings. This can range from loan or mortgage applications to tax preparation, court documents, and estate planning. When dealing with government agencies, it is common for them to allow you to gross up your Social Security earnings by up to 15%.

While Social Security is a well-known example of income that households gross up when completing financial paperwork, it is also a case-by-case situation. Each organization will have its own set of rules regarding whether or not individuals may adjust their income. While it is critical to distinguish between net and gross income, it is also prudent to inquire in advance about the organization’s rules.

The Verdict

Depending on the organization, you may be able to claim your Social Security benefits as pretax income on financial paperwork and forms. This is a critical step, as it can prevent you from being incorrectly rejected, but confirm this prior to filling out any specific forms.

Advice on Social Security

Taxes on Social Security can become surprisingly complicated. Whether you currently receive benefits or are just getting started, read on to learn how it all works.


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As discouraging as it may be to admit, you cannot rely on Social Security to fund your retirement — and a financial advisor can help you ensure that it does not have to. It does not have to be difficult to locate a qualified financial advisor. SmartAsset’s free tool connects you with up to three financial advisors in your area, and you can conduct no-cost interviews with your advisor matches to determine which one is the best fit for you. If you’re ready to begin the process of locating an advisor who can assist you in achieving your financial goals, do so now.

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