What Is Social Security Disability Insurance
Social Security Disability Insurance is a social insurance program funded by payroll taxes meant to help you if you become disabled. The program’s administrator, the Social Security Administration , generally allows you to earn coverage benefits if you meet their definition of disabled and are unable to work for a year or more.
The Social Security Disability Insurance program provides modest though vital benefits to you if you have suffered a serious and long-lasting medical condition that meets Social Security’s strict definition of disability. As a result, you can receive benefits if you meet the eligibility requirements.
How Much Money Can You Make On Social Security Disability
Using the above information, we can now summarize to answer this question. You can make up to $970 per month on an ongoing basis without worrying about losing your disability benefits. However, you can make over this amount for nine months in a rolling 60 month period in what is considered a trial work period.
But dont forget about SSI. Suppose you also receive SSI or regular Social Security Retirement income. In that case, those amounts count as income unless youre blind, so you should subtract those amounts from the $970/mo or $1350/mo, depending on your disability income earning strategy. This allows you to determine how much work income you can make without threatening your benefits.
Qualifying For Social Security Benefits
Anyone born in 1929 or later needs 40 Social Security work credits, the equivalent of 10 years of work, to qualify for Social Security benefits. You earn one credit for every quarter that you earn at least $1,510 in 2022 . The number changes annually.
Even if your business isnt particularly successful, or you only work part-time or occasionally, its not difficult to earn the Social Security credits you need. Even if your earnings fall below this threshold or your business has a loss, there are some alternative ways to earn Social Security credits. These optional methods may increase the amount of self-employment tax you owe, but theyll help you get the work credits you need.
Your eventual benefit payments do take your earnings into account. If you never earned much money from a lifetime of self-employment, dont count on getting a large Social Security check in retirement. If you started claiming benefits this year, for example, and your average monthly earnings worked out to just $800, your monthly Social Security retirement benefit would be $720assuming youre at full retirement age. Thats not much, but if you managed to get by on an average of $800 a month during your working years, you could probably work with a monthly benefit payment of $720 in retirement.
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What Benefits Does Social Security Disability Insurance Offer
The amount you receive from Social Security Disability Insurance depends on your average lifetime earnings before your disability began. Generally, the more you earned over a longer period, the more you’ll benefit, up to a maximum amount. The Social Security Administration calculates your disability benefit based on the amount of your Social Security “covered earnings.” Generally, these are your past earnings that have been subject to Social Security tax.
Your benefits are determined by averaging your covered earning over the 35-year period representing your top earning years. The SSA sees this as your average indexed monthly earnings . The SSA then applies a formula to your AIME to calculate your primary insurance amount . This serves as the base figure for the SSA to calculate your Social Security Disability Insurance benefit amount.
To understand your entire covered earnings history, the SSA provides access to your annual Social Security Statement. If you receive other disability benefits from private insurers, this will not impact your Social Security Disability Insurance benefits.
The Social Security Disability Insurance program rules limit your overall benefit under certain conditions. The combination of Social Security Disability Insurance and other government-sponsored disability programs cannot be more than 80% of the average amount earned before you became disabled. If this happens, the SSA will reduce your payments.
The Countable Income Test
Social Security will use the “Countable Income Test” to see if your work is SGA if you start your own business or begin to do contract or freelance work more than 24 months after you began receiving benefits.
First Social Security comes up with your countable income, as discussed above in the Three Tests. If your countable income is less than $1,310 a month, your benefits will not be terminated, no matter how much you are working.
If your countable income is more than $1,310 per month, your benefits will cease unless you can prove that you didn’t provide significant services to your business during that month. Whether you are doing significant services for your business is determined as discussed above in the Three Tests.
If you can show that your services are not significant, your benefits won’t be terminated, no matter how much money you make. Social Security cannot compare your work to what you used to do, to what business people in your community do, or judge what your work is actually worth .
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Four Different Types Of Income
Social Security separates the types of income into four categories, but some of them may only apply to one and not both SSD benefits programs:
- Unearned income: Income from sources other than work generally falls into the classification of unearned income. Examples include Social Security benefits, pension benefits, payments from state-administered disability programs, money received from friends or relatives that you do not have to repay, unemployment benefits, dividends, and interest earned on investments.
- Earned income: Money you receive as wages while working for an employer, money received through self-employment, royalties, payments from working at a sheltered workshop, and money paid to you as honoraria are some examples of earned income.
- Deemed income: Used primarily in determining eligibility for SSD benefits through the SSI program, deemed income represents the income of a spouse or parent deemed available for the benefit of the SSI applicant or beneficiary.
- In-kind income: When an SSI beneficiary receives food or shelter without charge or below its fair market value, it is classified as in-kind income. An exception to the rule about in-kind income is when the food or shelter is provided by a nonprofit agency instead of a friend or relative of the beneficiary.
How Social Security applies the different types of income when considering an initial application for benefits or in determining ongoing eligibility for benefits depends on the SSD program.
Reporting Your Wages Or Work Status For Disability Insurance
You will report any wages on your initial claim form when you file your claim.
Once you are eligible and receiving benefit payments, you must report any income you received, or that you have returned to work. If you dont, it could result in an overpayment, penalties, and a false statement disqualification.
While you are receiving disability benefits, you must report the following wages to us:
- All wages, including modified duty
Your benefits may be reduced if you have a:
- Benefit Overpayment for a previous Unemployment Insurance , Paid Family Leave , or Disability Insurance claim.
- Late court-ordered child or spousal support payment due.
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What You Can Expect To Pay For Coverage And How To Get It
Your lifestyle and needs are uniquely your own and your business is a unique entity with its own customer base, processes, assets, and liabilities. Your policy needs to be tailored with a specific benefit amount and length that reflects those requirements, along with other provisions that address additional concerns, for example, by getting a Cost-of-Living Adjustment rider to account for inflation*.
A policy with a smaller benefit amount, longer waiting period, and shorter benefit period will cost less than a policy with a larger benefit, shorter waiting period, and benefit payments stretching into retirement. Factors such as age, gender, lifestyle, and occupation will also affect your premium costs. One rule of thumb: expect to pay between 1% to 3% of your annual income for a policy that offers the coverage you need.
The most comprehensive type of disability insurance policy is non-cancellable and guaranteed renewable. That means that as long as you pay your premiums, the insurance company cannot raise your rates, change your monthly benefits or revise policy provisions unless you ask to revise your policy.
Some policies are only guaranteed renewable, with such a policy, the insurer can raise premiums, lower benefits, or change policy provisions but only if they get approval to do so for the entire rate class from your states insurance department.
Claim For Continued Disability Benefits
Report Online
If you have an SDI Online account, we will email you when the form is available. Follow these steps to complete and submit the DE 2500A:
- Log in to your account.
- Select Continued Eligibility Questionnaire in your SDI Online inbox.
- Return the DE 2500A to us online within 20 days from the mailing date.
Report by Mail
If you dont have an SDIO account, and your preferred communication method is mail, we will send you the paper form. If you do not return the completed DE 2500A, your benefits will stop.
Report the following:
- Payment or wages from your employer.
- Payment from your employers workers compensation insurance company.
- If you have recovered and/or returned to work.
If you are not on automatic payment, you will receive a Claim for Continued Disability Benefits every two weeks to certify that your disability continues. If you do not return the DE 2500A, your benefits will stop.
If you have an SDI Online account, we will email you when the form is available. Follow these steps to submit the DE 2500A:
- Log in to your account.
- Select Claim for Continued Benefits in your SDI Online inbox.
- If you selected Electronic in your SDI Online account as your preferred communication, you will not receive the DE 2500A in the mail.
- Return the DE 2500A to us online or by mail by the due date listed on the form.
Note: If you misplaced the DE 2500A, you can request the form through your SDI Online account or by calling 1-800-480-3287.
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The Comparability Of Work Test
Social Security will evaluate you under the following two tests if you are not doing significant services or making substantial income.
The Comparability of Work test compares your work with an unimpaired person in your community whose business is similar to yours. If Social Security determines the work is comparable, then it is considered substantial gainful activity regardless of your earnings.
Social Security looks at the following factors for the Comparability of Work test:
The Comparability of Work Test only compares work activity and not the value of the work performed.
Title Ii Disability Insurance
A Title II beneficiary will use a Trial Work month if self-employment activity meets the definition of a âserviceâ month: net earnings for the activity equals or exceeds the current yearâs Trial Work Period limit , or, the beneficiary reports spending at least 80 hours engaged in the trade or business during the month. SSA must rely on the individualâs own record of time spent. Service hours are defined only by the period of time the beneficiary spends providing a service to a client or producing a product. The time spent during the âstartupâ period is not included in the Trial Work Period: planning, purchasing or leasing space, equipment, applying for licenses or permits, etc.
To determine the net profit for a particular month, the SSA will compare the business records, such as profit and loss statements, with the individualâs income tax return. Generally, the SSA will look at each month individually however it may be necessary to average the earnings over a period of work if it is not possible to establish monthly net earnings.
Once the Trial Work Period has been completed, the SSA will review the self-employment activity to determine if the work meets the criteria established for Substantial Gainful Activity.
There are three tests that can be applied during the review:
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A Look At The Two Disability Programs Administered By Social Security
SSI and SSDI are the two programs created by federal law to pay benefits to disabled individuals. The SSDI program is under Title II of the Social Security Act and pays benefits to individuals who worked long enough at jobs or through self-employment and paid Social Security taxes on their earnings and income to be insured under the program.
Some individuals without work history of their own may be eligible for SSDI benefits on the earnings history of a parent or spouse. For example, adults whose disability began before they were 22 years of age may be eligible for SSDI through the earnings record of a parent. If you have questions or need more information about SSDI benefits through the work record of a spouse or parent, speak with an SSD lawyer at the Clauson Law Firm.
The SSI program, which is contained in Title XVI of the Social Security Act, is a needs-based program paying benefits to disabled adults and children with limited income and resources who cannot afford to pay for such essential needs as food and shelter. SSI does not, as does the SSDI program, have a work component as part of its eligibility requirements.
Social Security Disability Insurance For Self Employed Explained
Learn how Social Security Disability Insurance for self employed works and how Substantial Gainful Activity can affect your disability benefits.
Social Security Disability Insurance for self-employed is different from those who work for an employer.
When working for someone else, that employer takes Social Security taxes out of your paycheck and sends it to the Internal Revenue Service .
However, the self-employed must report net earnings to Social Security and pay their taxes directly to the IRS.
Keep reading to understand how self-employed disability works.
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How Much Disability Insurance Coverage Do You Need
To answer that question, start by estimating your current monthly living expenses, including:
While you can usually only get coverage to replace up to 80% of your personal income, its possible to get coverage for up to 100% of your fixed monthly business expenses. If you have substantial savings or other liquid assets, you can take those into account and adjust your needs accordingly. You may also decide later in the process that certain expenses may not be necessary however, you need to have a solid estimate of your personal and business expenses as you start shopping for a policy.
Disability Claim Continued Eligibility Questionnaire
Report the following:
- Payment or wages from your employer.
- Payment from your employers workers compensation insurance company.
- If your disability continues and you remain under the care and treatment of a physician/practitioner.
- If you have recovered and/or returned to work.
Note: If your claim is on automatic payment, after 10 weeks of payment, you will receive a Disability Claim Continued Eligibility Questionnaire . If you do not return the completed DE 2593, your benefits will stop.
Report Online
If you have an SDI Online account, we will email you when the form is available. Follow these steps to complete and submit the DE 2593:
- Log in to your account.
- Select Continued Eligibility Questionnaire in your SDI Online inbox.
- Return the DE 2593 to us online within 20 days from the mailing date.
Report by Mail
If you dont have an SDIO account, and your preferred communication method is mail, we will send you the paper form. If you do not return the completed DE 2593, your benefits will stop.
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Family Caregivers And Self
Special rules apply to workers who perform in-home services for elderly or disabled individuals . Caregivers are typically employees of the individuals for whom they provide services because they work in the homes of the elderly or disabled individuals and these individuals have the right to tell the caregivers what needs to be done. See the Family Caregivers and Self-Employment Tax page and Publication 926 for more details.
Three Tests For Social Security Disability Gainful Employment
If you apply for Social Security Disability Income or SSI or are on SSDI disability for less than 24 months, Social Security will use one of the following three tests to evaluate if your self-employment work is substantial gainful activity.
If Social Security finds your self-employment is SGA, you will be denied disability benefits.
Note: After the SSA approves you for SSI, you can earn over the substantial gainful activity limit without having your benefits terminated. The test used for ongoing SSI recipients is the SSI income test.
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What Happens If You Don’t Report Changes
The SSA has a lot of ways to determine your financialsituation, so it is very important that you notify the SSA as soon asone of the above changes occurs to avoid overpayments and penalties.
Overpayments. If you do not report a change and youare overpaid because of it, you will have to pay back that money, evenif you’ve spent it. Your benefits may be stopped until the overpayment is paid off. Read about what the SSA will do when it discovers an overpayment.
Penalties. If you do not report a change to the SSAimmediately, you can be penalized by losing money from your monthlypayments. This amount can range from $25 to $100.
If the SSA finds out that you purposefully provided the agency withfalse information, your benefits will be completely stopped for sixmonths. If it is your second violation, your benefits will be stoppedfor 12 months, and if it is your third violation, you will not receivebenefits for 24 months. In addition, penalties for fraud, which includesmaking false statements or misrepresentations in applying for benefits,can include imprisonment.
You could be eligible for up to $3,345 per month In SSDI Benefits