How Self-Employed People Can Legally Obtain Social Security Disability
One of the main criteria for receiving Social Security disability benefits is that the claimant must not perform substantial gainful activity. The Social Security Administration generally defines substantial gainful activity in terms of the monthly income earned by the claimant. However, this method does not work as effectively for self-employed people, so the SSA focuses on the value of their services to the business rather than the income that they receive for those services.
The SSA has developed three tests for evaluating whether a self-employed person is engaged in substantial gainful activity. If they are engaging in substantial gainful activity under the first test, the remaining two tests are not used. On the other hand, if the first test indicates that they are not engaging in substantial gainful activity, the SSA will consider the remaining tests.
The Three Tests for Self-Employed Claimants
The first test is called the “significant services and substantial income test.” This provides that a claimant has performed substantial gainful activity if they have rendered services that are significant to the operation of the business and receive a substantial income from the business. For people who operate a business on their own, except for farm landlords, any services are considered significant to the business. (Farm landlords are people who rent farm land to someone else.) Otherwise, a self-employed person renders significant services if they either contribute more than half the time required for the management of the business or provide management services for more than 45 hours per month.
Countable income is considered substantial for the purposes of this test if it averages more than certain amounts provided by federal regulations. It also may be considered substantial if it is comparable to the claimant’s income before the onset of their impairment if the SSA had not considered their earnings, or if it is comparable to the income of self-employed people without impairments in the same community and roughly the same type of business.
The second test is called the “comparability test.” This provides that a claimant is engaging in substantial gainful activity if their work activity is comparable to the work activity of people without disabilities in their community and in the same or similar business. This involves considering factors like the hours, duties, and responsibilities of the claimant, as well as their skills and efficiency and the energy that they spend on their work.
The third test is called the “worth of work test.” Under this test, a claimant may be engaged in substantial gainful activity even if their work activity is not comparable to people without disabilities. Their work activity must be clearly worth an amount provided by federal regulations when it is considered in terms of its value to the business, or when it is compared to the amount that an employee would be paid to do the work performed by the self-employed person.
Substantial Gainful Activity for Self-Employed People After 24 Months of SSDI
The SSA applies a distinctive test to evaluate the work that a self-employed person has performed when they have received SSDI for at least 24 months. A recipient has received SSDI for 24 months when they reach the first day of the first month after the 24th month for which they actually or constructively received benefits. (Constructively receiving benefits means that the recipient did not get benefits for that month only because the benefits were withheld to recover an overpayment by the SSA.) This test, known as the “countable income test,” assesses whether the recipient has engaged in substantial gainful activity, such that they are no longer entitled to SSDI due to their work activity.
Under the countable income test, a self-employed person has engaged in substantial gainful activity if their monthly countable income averages more than amounts provided by federal regulations for the months in which they worked, unless they did not render significant services in those months. In other words, they will be found to have not engaged in substantial gainful activity and will remain eligible for SSDI if their average monthly countable income is no greater than the amounts provided by regulations for the months in which they worked, or if they did not render significant services in those months.
