By Cheryl Coon
The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your Social Security/Disability professional.
Article #3, Help! I’m Self-Employed – am I eligible for Disability Benefits?
As I write this, a pile of tax documents is sitting on my desk awaiting my review. The tax documents belong to a client who has been self-employed for many years. John (not his real name) has been a self-employed as an engineer, with his own consulting company. Unfortunately, he has been diagnosed with Parkinson’s Disease and, as the years have gone by, his limitations have increased. At the age of fifty-nine, he’s finally admitting to himself that he needs to stop working and apply for social security disability benefits. But is he eligible?
The first question I’ll ask him is – are you still working? In the disability evaluation process, individuals who are found to be engaging in “Substantial Gainful Activity” (SGA) will be denied disability benefits. For most folks, whether or not they are earning SGA is easy to determine. If your paycheck(s) each month add up to $1070 per month, gross, that’s considered SGA and you won’t be eligible.
But if you’re self-employed, it’s more difficult to tell what you’ve actually earned. So Social Security does not use the standard Substantial Gainful Activity limit but instead applies three different tests to be sure that the self-employed person is not simply paying themselves less in order to be eligible for disability benefits.
Here’s how Social Security will assess whether John is over the Substantial Gainful Activity limit and should be denied disability benefits. By the way, if the answer to any of these tests is yes, John will not be eligible.
Test one: You have engaged in substantial gainful activity if you render services that are significant to the operation of the business and receive a substantial income from the business.
For most folks, if a person operates a business entirely by themselves, contributes more than half the total time required for managing the business, or if they perform management services for more than 45 hours a month, they will be considered to be “rendering significant services”.
The calculation for “substantial income” is complicated, but it takes into account business expenses, unpaid help provided by others, and impairment related work expenses. Even if your countable income is below the Substantial Gainful Activity benchmark when all of these factors are considered, you may fail the “substantial income” element of this test if you earnings are comparable to what you made before you became impaired or if your countable income is comparable to the earnings of an unimpaired self-employed person in your community doing the same work.
Test Two: You have engaged in substantial gainful activity if your work activity, considering factors such as hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in your community who are in the same or similar businesses as their means of livelihood.
Test Three: You have engaged in substantial gainful activity if your work activity, although not comparable to that of unimpaired individuals, is clearly worth the Substantial Gainful Activity benchmark ($1070 in 2014) when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work you are doing.
In any case, it’s critical to document your working hours, duties, assistance received from others, business expenses, impairment-related expenses and income if you are a self-employed individual seeking disability benefits. Each self-employed individual’s earnings will be evaluated on a case-by-case basis. Some self-employed individuals may be found to engaging in substantial gainful activity, while others may not.
For more information:
Cheryl Coon previously led the social security disability section of Swanson Thomas Coon & Newton of Portland, Oregon, where she represented disabled individuals seeking benefits, at all stages of the process from application to federal court appeals.
In June 2016, Cheryl Coon founded RDBO. Refugee Disability Benefits of Oregon. RDBO takes a unique approach, in which attorney Cheryl Coon, works closely with health care providers, case managers and counselors, as well as the refugees they serve, to ensure that refugees’ cases are presented competently and compassionately. We handle cases at every step of the disability process, from initial application to hearing to federal court.
The social security disability process can be frustrating. We believe it is important for potential applicants to be realistic about their chances for approval. We carefully evaluate the merits of each person’s case and suggest alternatives when we do not believe their case is strong. These alternatives may range from vocational assistance to waiting until a stronger medical record has been established.
Cheryl F. Coon, Attorney at Law
Refugee Disability Benefits Oregon
1137 SW Broadway
Portland OR 97205