Are There Social Security Disability Benefits for Self Employed
Most employers are required to deduct Social Security taxes from their employee's paychecks, match the deductions, and send the payments to the Internal Revenue Service (IRS). They also report the wage information to the Social Security Administration (SSA). Self-employed workers, however, will not have an employer who is doing this for them so they must pay their own taxes to the IRS and report their earnings to the SSA.
Reporting Earnings for the Self-employed
Earnings are reported by filing the appropriate tax forms. Self-employed workers who make net earnings of $400 or more must file the following IRS tax forms:
Form 1040 (U.S. Individual Income Tax Return);
Schedule C (Profit or Loss from Business) or
Schedule F (Profit or Loss from Farming) as appropriate; and
Schedule SE (Self-Employment Tax)
SSDI and the self-employed
Whether or not you will qualify for Social Security Disability Insurance (SSDI) if you are self-employed will depend on whether you have paid sufficient self-employment taxes. If you have owned your own business or have worked as an independent contractor but you have not paid taxes, you will have insufficient work credits to qualify for SSDI, regardless of the severity of your condition.
SSDI and Substantial Gainful Activity (SGA)
Another consideration before the SSA will award SSDI benefits to the self-employed is whether or not they are currently working and performing too much work to be considered disabled.
Social Security considers earning $1,070 per month in 2014 to be substantial gainful activity. This means the SSA has decided that if you can work and earn this amount of money you are not disabled.
If you are self-employed, however, the SSA has decided evaluating earnings is not always a good indicator of whether or not a worker is performing substantial gainful activity. To make this determination they have developed additional testing including the Countable Income Test (which is done if you start working after you receive SSDI) and the Three Tests.
Is your work substantial or gainful?
The SSA will use one of three tests to determine if those who are applying for SSDI benefits are performing too much work or making too much money. First, they will determine if a worker's self-employed work is SGA through the "Significant Services and Income" test.
Under this test, if you are the sole owner of the business and the income from your work or business is greater than the allowable SGA amount or $1,070 per month, you will be considered not disabled.
If you have other people working for you or who also co-own the business, if you are able to work "more than half of the total time needed to manage the business each month or you manage the company for 46 hours or more a month" you will be considered not disabled because your work is considered "substantial."
Other tests the SSA can use include the "Comparability Test" which compares your work to other work in the community. If your work effort is comparable to other workers who are performing substantial work, even if it is not gainful, you are performing what the SSA considers SGA work and you will be denied SSDI benefits.
Finally, the SSA can use the "Worth of Work" test which measures the value of your work. If the SSA believes the value is substantial, you will be denied SSDI benefits. Contact a SSDI lawyer if you have more questions about whether you are disabled.
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