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Long-Term Disability Payments When You're Self Employed

6 June 2019

Cassandra Stone

When you're self-employed, long-term disability is an option. However, it's important to understand that this title does come with some specific requirements, with some of them mimicking those of traditional employees. If you are self-employed and plan to file for disability, here is some of the important information you need to know.

Self-Employment Status

To qualify for benefits under a self-employed status, you must meet the government's terms for this status. The first guideline is that you either be the sole, or part, owner of the business. Second, you must contribute at least half the labor or time it takes to operate the business. 

Lastly, and most importantly, the money you make from the business must be your sole source of income. Being the owner of a business that you only operate in the evenings or the weekends would not allow you to qualify for self-employed status since it's not your sole source of income. You'd need to file under the standard employee option. 

Work Credits

Being self-employed does not absolve you of the requirement for work credits, as all applicants for long-term disability must have a minimum number of credits based on their age at the time of the diagnosis or injury. For people that are self-employed, the credits are calculated in the same manner that they are with traditional employees, in that you earn 1 credit for each quarter of earnings that exceeds the earnings threshold. 

However, you can only earn credit for reported income. People who have businesses but fail to report their income to the IRS might not have enough working credits on file to qualify, especially if they never worked a traditional job in the past.

Substantial Gainful Activity

When you're self-employed, you are still required to adhere to the substantial gainful activity, or SGA, income guidelines. However, the government does use a slightly different measure for calculating this threshold. With traditional employees, the person on disability is expected to stay under their income threshold. 

For self-employed people, the government will deduct expenses from your gross earnings and only count the net result against your SGA requirement. For instance, if your threshold is $1,220, a month, and you earned $1,300 from your business, but your expenses were $100, you might still meet the requirement. 

To minimize your chances of a denied claim, it's important to get it right with your first submission. Speak with a long-term disability attorney like those at Scott E. Shaffman Attorney At Law for assistance with the self-employment requirements. 

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