Social Security Administration Studies Self-Employment Among Disability Insurance Recipients

Social Security Administration Studies Self-Employment Among Disability Insurance Recipients

Last month, the Social Security Administration (in conjunction with the Office of the Inspector General) performed a study of 50 SSDI beneficiaries, looking for evidence of hidden self-employment income.

When an individual is self-employed, he or she must still annually report income to the IRS.  The IRS, then, sends the self-employment income (SEI) report to the Social Security Administration.  And the SSA, in turn, uses the information to determine eligibility for all types of benefits, including retirement, survivorship, and disability.  Higher SEIs can often disqualify a claimant from benefits he or she would otherwise be able to receive.

Thus, some claimants may look to conceal SEI from the agency, in hopes that the claim for benefits will be approved.

In the abovementioned study (available here: the SSA examined 50 SSDI recipients that had reported SEI before receiving SSDI payments—but upon applying for benefits and afterward, did not.  This could very legitimately be because the individual truly ceased the self-employment activities upon applying and being approved for benefits.  But it could also be because, as the SSA suspected of some, the applicant was continuing these activities but concealing the proceeds.

In all, of the 50 cases examined, 5 were illegally covering up their SEI by using a spouse’s Social Security number to report the proceeds.  By doing so, the SSA did not naturally become aware of the ineligibility of the benefits recipient.  In one example, from 1995 through 1997, a beneficiary reported over $10,000 per year in SEI.  Beginning in 1998, though, just after applying for SSDI, his spouse began reporting self-employment income (of, actually, significantly more money) and he, himself, no longer reported any SEI.

In a few of these cases, the claimants received hundreds of thousands of dollars of inappropriately distributed benefits.

The result of the study, then, was a recommendation that the SSA “develop a more sophisticated method for profiling cases where individuals are concealing SEI while receiving DI benefit.”