Self-employed individuals can collect SSDI benefits provided their economic activity falls within established guidelines. Members of the clergy, artists, farmers, and directors of non-profits often fall into this category. Moreover, SSA offers specialized assistance through the Plan to Achieve Self-Support (PASS) to those receiving SSDI benefits who wish to pursue self-employment rather than returning to a wage-related position.
The SSA establishes the eligibility of a self-employed individual to receive benefits based on three tests. These include the review of the individual’s work activity and whether the services they offer are critical to the operation of the business. The SSA will also review whether the individual receives substantial income from these operations when calculating the individual’s benefits.
The second test applied to determine whether the individual engages in SGA involves comparing the individual’s position with those of others involved in the same industry or with the same level of skill, experience, etc. that provide the same types of services.
The third test involves determining the true worth and value of the services rendered by the individual. For instance, whether the individual would pay an employee a similar rate for the same types of services rendered.
Finally, the SSA will only use these tests if the countable income test does not apply. The countable income test is used for those who have received Type II disability benefits for a period not less than 24 months. This test is also used when determining whether the beneficiary’s benefits should continue, or whether the individual has recovered from their disabling injuries.
Net Earnings Count
For the purposes of disability benefits, only net earnings count. This means that only the income that remains following all other payments is counted as income. The amount shown on an individual’s tax return on the Schedule C is then multiplied by .9235 to account for the difference in Social Security taxes self-employed individuals pay. For this reason, it is crucial that this information is accurately listed on the Schedule C as it is the baseline for determining eligibility and the individual’s net income for the year.
Moreover, benefits for self-employed individuals are only reduced by $1 for every $2 in net income earned. Thus, those who are self-employed while collecting Social Security Disability Benefits can significantly improve their financial situation.