Can Self-employed Individuals Process Social Security Disability Benefits?

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Many people with disabilities are self-employed. They are either managing a business or working freelance. In fact, in the Chartbook on Work Disability in the United States, the number of self-employed individuals with disabilities is the same as that of people working in the federal, state, and local government.

This percentage also doesn’t include self-employed Americans who may experience disability later. Perhaps it could be due to injury or disease.

Simply put, the country has many freelancers and entrepreneurs with disabilities. This then begs the question: if they’re working, are they entitled to disability benefits? For instance, can disabled business people in Salt Lake City process disability claims?

What Makes a Disability?

Many factors can affect an American’s access to Social Security disability benefits. One of these is the definition of disability.

Dictionaries like Merriam-Webster define the word as impairment of the physical, cognitive, and mental conditions that may interfere or limit one’s ability to perform specific tasks. Social Security also has a similar definition, except that it already creates criteria. A disability is an impairment that may result in death or last for not less than a year.

Social Security uses a special book or guide that lists its recognized illnesses and disabilities and their criteria. The non-inclusion of a person’s health issue doesn’t mean they can no longer claim disability benefits. Still, they may need to submit more proof, especially those that pertain to limited capacity.

Other Factors That Affect the Benefit

Besides the definition of disability, a self-employed individual who wishes to claim disability should consider the following:

1. Work Credits

Anyone can contribute to their Social Security, but not everyone may be entitled to disability benefits. First, they need to have at least 40 work credits by the time they make a claim.

What is a work credit? It is equivalent to $1,410 in self-employment income. The amount can vary according to year, and the maximum credit one can earn 4 per year. It means to get 4 credits a year. The maximum income is $5,640. A self-employed can report this in his estimated taxes or annual tax return.

Therefore, to get 40 credits, one must have worked for at least 10 years, whether as a self-employed or employed (or a combination of both). Otherwise, they should have earned half of the credits within the last 10 years. Younger individuals, though, may qualify for fewer credits.

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2. Three Tests

Social Security also places a cap on the income of an applicant who likes to claim disability. It considers the person’s substantial gainful activity (SGA). This one, though, is hard to measure among self-employed. Their earnings do not immediately count as a good indicator.

For this reason, Social Security performs the Three Tests. You are less likely to be engaged in SGA if:

  • Your productivity or output is not comparable to that of an individual with no disability or similar businesses in the community.
  • You don’t provide significant service to a particular business and earn at least $1,260 a month.
  • The value of work or business rendered is less than $1,260 a month, or this amount doesn’t equate to the savings you enjoy from not hiring another person to do the work.

3. Payment of Self-Employment Tax

For the employed, their company will already reduce their gross income with withheld taxes. Self-employed individuals, meanwhile, need to pay self-employment tax if they wish to contribute to Social Security. The tax rate for 2020 is 15.3% based on your income. About 12% of what they provided goes toward their Social Security. The rest is for Medicare.

Disability benefits can go a long way in covering a portion of your income if you can no longer work. Being self-employed doesn’t limit your access to that. However, you may need to meet certain criteria before you can qualify. When you need help in processing your request, look for an advocate or a disability lawyer.

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