The Social Security disability process involves rules about income and work-related activities. For most people, Social Security taxes are taken out of their paychecks by their employer, these taxes earn an employee credits to be eligible for Social Security Disability Insurance (SSDI) benefits if they become impaired and are unable to work. There are also many other types of work where people are self employed and not necessarily paying taxes into Social Security. Regardless of whether they are paying taxes into Social Security, all work-related income must be reported to Social Security. Sometimes people engage in illegal activities to earn work-related income, nevertheless, this income also has to be reported to Social Security.
Can an illegal activity be a trade or business?
The illegality of an activity does not prevent it from being a trade or business. For example, professional gamblers, bookies, etc. may be engaged in a trade or business. If you are in this category, you are considered self-employed and are required to report your income and pay self-employment taxes.
Social Security coverage for the self employed
Most self-employed people became covered by Social Security in 1951 with a few exceptions. These exceptions include:
- Farmers, ministers, and some other individuals (including certain professionals) were not covered until 1955;
- Additional groups of professionals were covered for taxable years ending after 1955; and
- Self-employed doctors of medicine were covered for taxable years ending on or after December 31, 1965.
How Is Self-Employment Income Calculated?
Self-employment income that is creditable for Social Security is based on net earnings from self-employment derived from a “trade or business” covered by the law.
Payment from self-employment that is not covered under Social Security is included when figuring income for earnings test purposes.
These are just some of the rules related to self employment, to learn more visit www.ssa.gov.
