I made more than $40,080, Why they hold back some of my social security?

Q) I’ve been getting my social security benefits since April of this year, and now I received a letter in the mail asking me to submit my income again to ensure that you are paying me correctly.. I was told after I turn 66 that I could have as many jobs as I wanted. I first signed up in January and then was notified that I would not receive any back pay from the time that I first signed up. Now I received this letter stating that if I made more than $40,080 you will have to hold back some of my social security. Why? Like I stated, I received my first check in April and now this. Can you explain this to me?

A) You may need to call your local social security office or visit in person. Here is more information from Social Security website

If you receive Social Security Income and work, you must tell us right away when you start working and you must report your earnings each month. When you work, we may use your earnings to compute your new benefit amount.

To figure out how working affects your SSI benefit, we disregard:

The first $65 you earn the current month; or
As much as $85, if you do not have any other income.
If you earn more than $65 (or $85, if applicable), we reduce your benefit $1 for every $2 you earn in that month.

For example, if you earned $500.00 (gross wages) in March 2013 and do not have other income or work expenses, this is how we compute your SSI benefit:

Step 1: $500.00 minus $85 equals $415.00;

Step 2: $415.00 divided by 2 equals $207.50. We use $207.50 as the amount of earnings we count to reduce your SSI benefit;
Step 3: $710.00 (2013 maximum SSI monthly benefit). We then subtract $207.50; and

Step 4: $502.50 (Your SSI benefit amount)
We may exclude the cost of any impairment-related items or services you need to help you work which will allow us to pay you more SSI. Some examples of impairment-related work expenses are medicines, screen readers, service animals, counseling, or therapy sessions. We can deduct the costs of these expenses from your earnings if:

You pay for the items or service yourself;
You will not be reimbursed;
You submit proof of payment; and
We approve your expense.

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