Monday, December 31, 2012

Self-Employment and Social Security Disability Benefits

Recently, I was asked the same question by two potential Social Security Disability Claimants: one is a small business owner who suffers from Lyme's disease and the other one, is a self-employed electrician who suffers from rheumatoid arthritis.  They both wanted to know whether they could continue to work on a part-time basis and be eligible for Social Security Disability Benefits.
The answer to their question is fairly complicated due to the fact that both of them are self-employed.  If they had been salaried employees, the answer to their question would have been relatively straight forward.  Under Social Security Disability rules a person cannot be eligible if he or she is engaging in a Substantial Gainful Activity (SGA).  For salaried employees, SGA is generally work that brings in over a certain dollar amount per month. In 2012, that amount is $1,010 for non-blind disabled applicants, and $1,690 for blind applicants. If a salaried employee makes more than that amount per month, the Social Security Administration figures that the applicant must not be disabled.  If a person makes more than the amount determined to be the SGA level, that person cannot be eligible for Social Security Disability regardless of how sick he or she may be.
However, in the case of persons who are self-employed, SGA is not determined solely on monthly income.  A small business owner might work 40 to 50 hours a week and make very little or no profit.  In order to deal with this particular issue, the Social Security Administration has an evaluation criteria which consists of three tests.
The Social Security Field Offices will consider all three tests before it can be established that the individual's work activity is not SGA. The following are just brief descriptions of each of the three tests:
1. Test One: Significant Services and Substantial Income
The individual's work activity is SGA if he or she renders services that are significant to the operation of the business, and if he or she receives from it a substantial income; or
2. Test Two: Comparability of Work Activity
The individual's work activity is SGA if, in terms of all relevant factors such as hours, skills, energy output, efficiency, duties, and responsibilities, it is comparable to that of unimpaired individuals in the same community engaged in the same or similar businesses as their means of livelihood; or
3. Test Three: Worth of Work Activity
The individual's work activity is SGA if, although not comparable to that of unimpaired individuals, it is, nevertheless, clearly worth more than the amount shown in the SGA Earnings Guidelines when considered in terms of its effect on the business, or when compared to the salary an owner would pay to an employee for such duties in that business setting.
As one can see from these requirements, those who are self-employed while applying for Social Security Disability Benefits will undergo a high level of scrutiny by the Social Security Administration.  The Field Offices will make a determination on a case by case basis depending on the level of involvement and the value of the work that the applicant performs for his or her particular business enterprise.
Given these complicated circumstances, it is advised that self-employed applicants  who wish to continue working while applying for Social Security Benefits should seek the assistance of a skilled Social Security Disability Lawyer.