Because of the pandemic, I retired in August of 2021 when I turned 63. My first Social Security checks, for about $1,800, were received in September through December. Because most of my 2021 income was unemployment compensation, the 2021 annual earnings limit did not apply. Earlier this month, an employment offer was made to me. My question, how much can I earn during 2022 and not give up all or part of the Social Security benefits?

— BT, email

Based on the information provided, you will reach your Full Retirement Age (FRA) of 66 and 8 months in April of 2025 (Yep, we did the math!). That means your annual earnings limit for 2022 is $19,560. Put differently, if your 2022 earned income (e.g., wages, salaries, gig economy and/or net self-employment income) is at or below $19,560, no reduction of Social Security benefits will occur. However, you will lose $1 for every $2 of earned income over the limit. For example, if your 2022 earnings are $20,560 (i.e., $1,000 above the limit), your Social Security benefits will be reduced by $500. At $49,560 (i.e., $30,000 over the limit), a $15,000 trimming of your benefits will occur.

Since you were born before 1960, the earnings limit test mentioned above applies to you. Folks born in 1960 and later encounter the earnings limit test until they turn 67,

During the transition year (i.e., 2025 – BT that's the year you reach FRA), the earnings limit is less draconian (i.e., $51,960 for 2022 with later years adjusted for inflation) for money earned before reaching FRA. The "penalty" for exceeding this earned income boundary is $1 for every $3 over the annual earnings limit.

When a taxpayer is at FRA for the entire year, the annual earnings limit no longer applies. This "no harm, no foul" provision will apply to you, BT, in 2026. At this point we have to insert the usual disclaimer. There are exceptions to the above rules that can be found at the Social Security website (www.ssa.gov).

Roth IRAs did not receive enough attention in last week's column. Several readers commented on the lack of detail concerning the Roth IRA. Below is our effort to give the Roth IRA equal time.

Last week, the rules applying to traditional IRA contributions were covered. Roth IRAs, in many ways, are the Internal Revenue Code's version of a "mulligan" (i.e., something happens, but it is usually not reported … with exceptions). In the Roth (and the traditional IRA) situation, there is a tax credit that may be available. We again recommend IRS Publication 590A, a useful resource that includes helpful worksheets and other practical examples.

A Roth IRA is an individual retirement plan that, for the most part, is subject to the rules applying to a traditional IRA. The difference is a traditional IRA contribution provides a taxpayer with an income tax deduction while a Roth IRA participant receives NO tax deduction. Both types of accounts grow tax-free. A significant contrast occurs at the time of withdrawal. Money taken from a traditional IRA is typically fully taxable while a distribution from a Roth IRA generates no reportable income and no income tax based on the "tax benefit" rule. In other words, since the taxpayer did not receive a front-end deduction, there is no income reported when money is withdrawn.

The first question about a Roth IRA contribution is tied to COMPENSATION, which looks to the same components as a traditional IRA (e.g., wages, salaries, gig economy and/or net self-employment income).

If 2021 modified adjusted gross income (MAGI) is less than $280,000 (married filing jointly — MFJ) or $140,000 (single or head of household — SHOH), a contribution to a Roth IRA can occur. No age limit applies to a Roth IRA, but the inevitable phase-out applies to the AMOUNT OF CONTRIBUTION. The IRS breaks out its eraser at $198,000 (for MFJ) and $125,000 (for SHOH).

In general, until you hit the above MAGI limits and if contributions are made only to Roth IRAs, the contribution limits covered last week are operative (i.e., the lesser of $6,000 –for people who are 50 or older, $7,000 — or taxable compensation). For folks contributing to both traditional and Roth accounts, be aware that the amount you can contribute to a Roth is the amount remaining after a reduction occurs for traditional IRA contributions. Similar to the traditional IRA, the "Kay Bailey Hutchinson Spousal IRA" may increase the amount of Roth IRA contribution, slightly, if specific criteria are met.

When can a Roth IRA deposit be made? Contributions for 2021 must occur on or before April 18, 2022. Be sure to tell your IRA sponsor which year the contribution applies to. If you somehow contribute too much to your 2021 Roth, withdraw the excess (and any related earnings) by the due date of the return to avoid the 6 percent excess contribution excise tax.

How about reporting a Roth IRA on your Form 1040? As noted above, there is no need to report Roth contributions. However, the main exception to this rule surfaces when a taxpayer is claiming the Retirement Savings Contribution Credit. This credit — also known as the "Saver's Credit" — can climb to either $1,000 (SHOH) or $2,000 (MFJ) and looks to a variety of retirement accounts (e.g., Roth and traditional IRAs as well as employee contributions to an employer's 401(k) or 403(b) plan). We will address this credit and others in a future column.

Ken & Klee's income tax bulletin board. The IRS will start processing individual income tax returns tomorrow, Jan. 24. National Taxpayer Advocate Erin M. Collins … in her Annual Report to Congress called 2021 "the most challenging year taxpayers and tax professionals have ever experienced" while describing the IRS telephone service as "the worst it has ever been." Collins concluded her report with several suggestions to improve taxpayer service while pointing out that the IRS workforce is currently 17 percent lower than the fiscal 2010 figure.

Rick Klee served as the tax director at the University of Notre Dame from 1998 through August 2019. A retired CPA, Klee is a graduate of Notre Dame. You can contact him at rklee@nd.edu.

Ken Milani is a professor of accountancy at Notre Dame where he served as the faculty coordinator of the Notre Dame Tax Assistance Program. Contact him at milani.1@nd.edu.E-mail questions to either.

This article originally appeared on South Bend Tribune: Tax Talk: 2022 earning potential for a retiree under full retirement age