Contributions to Retirement Accounts and Self-Employment While Receiving Social Security Disability

By / April 21, 2017 / After You’re Approved for Social Security Disability & SSI / 16 Comments

Learn how retirement account contributions and self-employment relate to your claim for Social Security Disability benefits.

Dear Disability Advisor,

I am a disabled veteran getting navy retirement, VA compensation and pending SSDI. I have been out of work for 1.7 years and although I cannot return to work in a traditional office or work full time I would like to do independent contract work from home. The work is very intermittent and only a few hours a week, but occasionally it may end up being above SGA. I would like to put my earning into an individual 401K so that I have a cushion in the future; it would also lower my taxes and I was wondering since I would not be claiming these earning would it also lower what I report to SSA so my SGA would be lower or maybe even nothing since I can contribute $24,000 of earnings? Thanks Kelly

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Dear Kelly,

Your contributions to a retirement plan will not lower your earnings when your work activity is evaluated for substantial gainful activity (SGA). Net profit, number of hours worked per month, essential nature of services to the business, and other factors are considered in the evaluation of self-employment. In 2017, $1,170 net profit from self-employment is the dollar benchmark for SGA.

You need to report the work when you start. If you are approved, you will be asked for your gross earnings and net profit. Because compensation for self-employment services is not always received in the months in which the services are performed, receiving a substantial payment in one month may not mean that you earned it all in that month, so keep a work-activity log (dates and hours worked). If you are approved for Social Security Disability (SSD aka SSDI), discuss with a claims representative how to report your variable work activity and earnings other than submitting a copy of your self-employment tax return annually.

Do keep in mind that if some months are determined to be Trial Work Period (TWP) months, that is, months that you have net  earnings of $840 or more, at the end of the nine TWP months, for the next thirty-six months, which is called the Extended Period of Eligibility, you will not be paid for any month you perform SGA. After the end of the EPE, if you perform SGA for even one month, your claim will be closed.

Sincerely,
Kay Derochie

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Contributions to Retirement Accounts and Self-Employment While Receiving Social Security Disability
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  • Dear Manuel,

    I re-posted the reply in response to your follow-up inquiry. To view the reply, you have to look for your question and my answer under the article where you posted the questions.

    Sincerely,
    Kay

  • You are welcome, Art.

  • Dear Art,

    Your question about taxation of Social Security benefits would best be directed to the IRS especially regarding whether or not the settlement is taxable. If your state has income tax, I recommend also checking with your state’s Department of Revenue because the state law may differ from federal law.

    Most income counts when determining whether your income is over $25,000 for the purpose of deciding whether any of your Social Security is taxable. The IRS includes a Social Security taxation worksheet in the 1040 instructions that are available online at http://www.irs.gov. It is necessary to use that worksheet to figure out how much if any of your benefits are taxable.

    The $1,170 figure doesn’t have anything to do with taxation. It refers to gross wages or net profit from self-employment activity and is a benchmark that usually indicates a person is performing substantial gainful activity (SGA). If you are not working, then the $1,170 is not relevant to your claim.

    Previous posts from you indicate that the settlement is a workers compensation settlement, so you must report receipt of the settlement to Social Security and the settlement may cause a reduction in your SSDI benefits and possibly an overpayment.

    Sincerely,
    Kay

  • Melly

    Is Schizoaffective Disorder a disability?

    • Dear Melly,

      Having a diagnosis does not necessarily mean that a person is disabled. Whether or not a schizoaffective disorder can be the basis for payment of disability benefits depends on how severely the illness impairs a person’s ability to function in the workplace. This is true of any diagnosis: the diagnosed illness or injury must keep a person from being able to perform substantial gainful activity for a period of at least twelve months.

      Sincerely,
      Kay

  • Dear Edwin,
    I can’t advise you how to show this income on your tax return, but if you file a self employment tax return Internal Revenue Service (IRS) will report it to Social Security. If you haven’t reported this to Social Security, they will contact you after they receive the information from IRS. Your case is complicated, but you have to determine how you will report this income to IRS. If it has to be reported as self employment income, you should report this to Social Security now. They will make the determination how it will affect your Social Security Disability (SSDI).
    Sincerely,
    Jane
    Sincerely,
    Jane

  • Dear Edwin,
    Social Security Disability (SSDI) will not use your wife’s retirement income to determine your eligibility to disability.
    Sincerely,
    Jane

  • Dear Travis,
    The disability examiners use a list of impairments to determine if you meet Social Security’s definition of disability. This is called medical impairment codes. This code is listed on your record and can be found by any employee from Social Security. You can call them ask them the code and ask them to explain what medical impairment the code is used for. This is a reference about these codes you can use https://secure.ssa.gov/poms.nsf/lnx/0500530920.
    Sincerely,
    Jane

  • Dear Pete,

    Normally work that lasts less than six months and ends due to a medical condition can be treated as an unsucessful work attempt, which allow you to claim a disability onset date of the day after the last longer stretch of work, if it also ended due you a disabling condition. Ordinarily, your last work of six months and thirteen days would not be considered an unsucessful work attempt. If I were you, however, I would claim to your cease work date before the last four jobs on the chance that the last job would also be deemed an successful work attempt.

    On the vocational questionnaire (SSA-3369), be very detailed in listing all your jobs in your last fifteen years and the start and stop months. Be specific about how your physical and mental conditions caused you to have poor performance resulting in being let go including naming the duties that you were not able to perform at an acceptable level.

    Sincerely,
    Kay

  • Dear Txmade254,
    If all other requirements for the Supplemental Security Income are met, your son would be eligible for about $570.00 a month. Assuming your girlfriend is not your son’s mother, her income is not considered in determining your son’s payment amount. Also your expenses do not determine payment amount.
    Sincerely,
    Jane

  • Dear Virginia,
    Kay said you are welcome.
    Sincerely,
    Jane

  • Dear Virginia,

    A medical decision has been made, but the status report does not reveal whether it is an approval or denial. When the rest of the administrative process has been completed you will be notified of the decision.

    Sincerely,
    Kay

  • Dear Virginia,

    If the medical appointments are necessary for maintaining your medical treatment regime or are urgent new treatment, yes, you could make a case for dire need. However, even if you got your approval letter now, you might not benefits in time to pay for all or any of the appointments. Perhaps you can talk with the providers and explain you have been verbally approved by the judge and ask them to allow you to pay the co-pays when you receive your back benefits.

    If you were approved for Social Security Disability (SSDI), your SSDI claim will be sent to a central payment center, where they will double check that you were insured on the date of your established date of disability; calculate your benefit amount applying any offsets you might have, such SSI (see below), workers compensation, or public pension; and authorize payment. This can take two months or more. Back pay is typically paid a month or more after the first monthly benefit.

    If you were approved for Supplemental Security Income (SSI), your local Social Security office will calculate and authorize SSI payment. Before payment can be calculated, a financial update will be needed from you if your claim has been approved on appeal and even sometimes as an initial claim if it has pended a long time. The office will contact you for a financial update so that benefits can be calculated for past months. Usually you will be paid within a month of the update interview and submission of any requested documents.

    If you were approved for both, the SSDI benefit calculation will be deferred until the SSI calculation has been completed and will start a month to two months after SSI processing is complete. SSDI back benefits will be reduced by the amount of SSI benefits payable for the months in which SSDI and SSI eligibility overlaps. Typically SSI back pay is paid in up to three installments six months apart and the first two will not exceed $2,205. However, if after your Social Security starts, you are no longer eligible for SSI due to your ongoing SSDI benefit, you can request the remaining SSI installments to be released. Also, if you have a compelling need for more than the initial installment, you may also be able to get early partial release of part or all of later installments

    Sincerely,
    Kay

  • Dear Kyle,

    Your work credits insure you; the amount of your earnings determines your payment amount and I am unable to estimate it. If you do not now have a claim pending, you can request an earnings statement, which will give you an estimate. The statement can be requested by setting up a “My Social Security” account at http://www.ssa.gov. If your claim is pending, you may not be able to get the estimate online.

    Sincerely,
    Kay

  • You are welcome, Art.

  • Dear Art,

    The answer to your question lies with the person or company that you plan to buy the car from. If they are willing to extend you credit to purchase a car, then you can do so despite your current credit rating.

    Sincerely,
    Kay

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