How does Social Security know how much a person has earned?
Employers report earnings to Social Security on Form W-2 each year for earnings from the previous year. Employers are required to make this report by March 31st. Self-employed persons report their earnings to the Internal Revenue Service (IRS) on their tax return on Schedule C and Schedule SE and IRS transmits that information to Social Security. Social Security then posts the earnings information on an individual's record.