Can a Self-Employed Person Seek Disability Benefits?
It’s a bearish job market that’s out there right now. Even as jobs are slowly climbing back to pre-pandemic rates, inflation rates and a very stratified economy ensures that things are still a tad difficult for some people. Thankfully, Americans have been able to resort to social security during the worst of it, seeking such avenues as disability benefits.
Social Security is taxpayer-funded. By paying social security taxes as well as keeping gainful employment, people can get certain benefits depending on how many work credits they’ve earned. Despite the language, disability benefits are not just for those traditionally described as being “in gainful employment”.
Those who are “self-employed” – typically those who run their own businesses or work as freelancers or independent contractors, etc— are eligible for disability benefits. These people are affected by unfortunate situations and economic downturns as much as normal people. So it is only fair that when they become ill or unable to work, they are also able to apply for disability benefits.
The question as to whether or not they actually qualify is one determined by a separate process, and can only be influenced by their work history and how much they have paid in taxes.
Qualifying for disability benefits as a self-employed person.
As a general rule, most people who pay Social Security taxes qualify for disability benefits from the Social Security Administration.
It follows that it is not every self-employed person that can qualify for disability benefits. To qualify for disability benefits as a self-employed person, you must have consistently paid social security taxes, usually on an annual or quarterly basis. These taxes are typically paid as part of the process of filing your schedule or returns at tax time.
The self-employment (SE) tax largely consists of Social Security and Medicaid taxes. The SE tax rate was 15.3% over the past year. A cut of this, usually 12.4%, goes to Social Security, and the rest of it goes to Medicaid. There’s more information to be found about the SE tax on the IRS website.
When you pay Social Security Taxes and you’re working, you can earn work credits. These work credits go to determine how eligible you are for disability benefits.
Once you have that tax history and have accumulated enough work credits, you’re already well ahead in the process of obtaining Social Security disability insurance (SSDI). Having enough work credits also qualifies you for other benefits like survivor benefits and retirement benefits.
In the event that you as a self-employed individual have not accumulated enough credits to qualify, you may still be eligible for Supplemental Security Income (SSI). SSI is not dependent on your record of earnings and can provide nearly the same range of disability income provided by SSDI benefits.
How does the SSA define “disability?”
Generally, the Social Security Administration does not employ a loose definition of disability. So, to satisfy the criterion of disability, you must be able to show that;
- You are unable to do any substantial work because of your medical condition(s); and
- Your medical condition(s) must have lasted, or be expected to last at least 1 year, or be reasonably expected to result in your death.
- However, even before the SSA considers your medical situation, it almost always first looks to see whether applicants are engaged in “substantial gainful activity” (SGA) and are making a certain amount of money. If they are, the result is the applicant will be denied his disability claim.
- So, being unable to “engage in substantial gainful activity” is a criterion that’s especially important to be approved for SSI or SSDI benefits.
For those who are self-employed, the process is slightly different. The Social Security Administration aptly recognizes that your net profit is not necessarily a great indicator of “substantial economic activity”. The alternative test that’s employed to determine whether your work is a substantial gainful activity is called “the Three ” vis;
- Whether your work provides significant services to the business and brings in $1,310 or more in average monthly income,
- The comparison between your work and the work of persons without disability in your community engaged in the same or similar businesses, and
- Whether your work is worth at least $1,310 per month in terms of its effect on the business or what it saves you from having to pay an employee to do the work.
If you’ve been receiving Social Security disability benefits for more than two years, this test is a bit easier to meet.
To determine your income, the SSA typically deducts un-incurred business expenses from your net earnings Un-incurred business expenses are expenses that you don’t pay for—for example, donations made by other people to pay for a product or service your business uses.
Process for filing a claim and appeal
To file any type of disability claim, applicants must typically fill out an application for disability benefits through the SSA. Along with the application, applicants must also provide medical documents that detail whatever medical condition(s) it is that’s making you unable to work.
Applicants can fill out their application online (for SSDI), or you can visit the local SSA office and fill out an application there. In addition to any medical records that you can provide to the SSA, they must also sign release forms to allow the SSA to request any additional records that they need in order to review claims. Applicants will also need to submit their past tax returns because they are self-employed.
Tips for filing a successful claim
Filing for social security benefits can admittedly be a very complicated process. What’s more, it’s a process with a notorious reputation for rejected filings. Contrary to popular belief, the process is not rigged against you. There are just some steps or actions that need to be taken to guarantee a high probability of success in your application.
Sort and compile all your checklist items early on at the start of your application.
Be sure to sort and compile all documents requisitioned in the application checklist. Make sure any information asked to be provided is clearly set out and have e-copies of those documents on hand. Obtain documents from your doctors to have as ready proof of your illness and medical history
Start the process of application online.
You can cut your interview time in half by starting the process online. You can complete it online. You may still need to keep your scheduled appointment with the local Social Security office, so a Representative can review your information.
Involve a lawyer in the process.
The expertise a Social Security Attorney brings to the table could be especially invaluable in identifying and organizing information to support your claim. A lawyer can help you explain this information to your physicians and can help you follow through on your application. With an attorney working in your interest, you simply have better chances of obtaining disability approval.
Be honest in your claim
It can make a huge difference to be realistic and truthful about your situation. Try to avoid exaggerating your condition and avoid trying to portray a strong-man attitude. Ensure that your doctors are aware of treatments you have scheduled or gotten from other medical professionals.