In every disability case, a Claimant’s cash flow (Passive Income and Regular Income) are observed. These earnings may be examined for evidence of Substantial Gainful Activity, or they may be examined for the purpose of reducing SSI benefits. In all cases though, the nature of the earnings is important. In the interested of ensuring the correct payment of income taxes, many Claimants report earnings that do not reflect money gained through actual work. Rather, these earnings represent passively income. Claimants should be prepared to explain to an Administrative Law Judge or Disability Adjudicator why these earnings should not provide support for the idea that they Claimant was engaged in work during a claimed period of disability.
Passive Income – Business Ownership
Passive owners of a business-generating service: Per SSR 83-34, a passive business owner’s earnings are only counted as “Substantial Gainful Activity” if they are defined as significant. Such earnings are only significant and problematic to a case if the Claimant spent more than half of the time it took to earn that income.
- Example: a website designer individual spent a few hours to set up a referral generating website that fed referral leads to another service provider. In exchange for referrals, the service provider gives the website designer 10% of the cut of the business. This would be defined as non-significant passive income because the individual claimant spent much less than half of the time it took to actually earn the money from services provided by the service provider.
- Example: If an individual owns a business, but barely performs any of the productive work necessary to make the enterprise fruitful, then Social Security Law requires allows such earnings to not count as SGA.
Passive Income – Rental Income
Rental Income: Per POMS SI 00830.505 (A)(4), “Net rental income is unearned income unless it is earned income from self-employment (e.g., someone who is in the business of renting properties).”
- Someone who passively bought one ATM machine and rented that machine for a profit would likely not be found to be engaging in SGA for Social Security purposes.
- However, someone in the business of buying and renting real property, or any such similar venture, may well be found to be engaging in SGA.
Passive Income – Special Conditions
Work done under special conditions: Per CFR § 404.1573(c)(6), work done under special conditions, and work based on opportunities presented through “past associations” does not necessarily show substantial gainful activity.
- Someone “hired” by close family or friends to “watch the store” and get paid significant income, when really the employee is scarcely working and has minimal expectations placed upon them may not be considered to be engaging in SGA. This job was provided as an act of charity and kindness, and not because of actual work performed by the individual claimant. As such it should not be counted as SGA.
- A disabled individual who profits from the past business network that they built before they became too sick to work, and who occasionally cultivates or reactivates those relationships to make deals that require very little time, should similarly not be found to be earning SGA through those activities.
Disability and SSI claims can be a complex undertaking. O’Brien & Feiler urges all readers who need assistance to seek out local competent counsel. If you are in Georgia, please contact O’Brien & Feiler to discuss your case with a disability attorney for free.