Advance Payments for Future Services Can Trigger Social Security Withholding Early, Affecting Seasonal Workers' Benefits
Under cash-method accounting, nonrefundable deposits collected in one year for services to be performed the next can be counted as income for the collection year. This can lead to Social Security withholding benefits for individuals who claim Social Security before full retirement age and continue working, as their net self-employment earnings may exceed the annual limit. For every $2 earned above the limit, $1 in benefits is withheld, impacting seasonal operators like hunting guides, caterers, and contractors who receive advance payments months before performing the work.
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