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If you receive SSI or SSDI, it is crucial to track and report your income!

Here in greater Chicago, and (I expect in many other densely urban settings) we frequently think of distance in terms of time. When I am driving from my office to visit a client on location, I am less concerned with how many miles I will have to drive than with how long I expect to be on the road and thus how early I need to leave in order to be at my appointment on time. But when it comes to filing Schedule C of my tax return, the variable that counts is not how many hours I have spent on the road for business, but rather, how many business miles I have driven. Moreover, according to IRS rules, only some of my miles driven can be counted as a business expense. In an analogous manner, although my clients frequently ask me how many hours they or their adult children can work, while still retaining eligibility for their Social Security disability benefits, it is not hours worked that matter to the Social Security Administration (SSA), but rather the amount of income I have received. And the amount of income that a person can have and still maintain eligibility is impacted by variables, such as the nature of the income and the specific type of disability benefit.

In order to qualify for Supplemental Security Income (SSI) due to disabling conditions, you need to demonstrate that you are incapable of Substantial Gainful Activity (SGA), that is to say that you are incapable of earning more than $1,350/month (2022 threshold). Once you have been determined to be disabled by the Social Security Administration, the concept of SAG is never applied again in determining your ongoing eligibility for SSI. As long as you have no medical improvement in your disabling conditions, you remain eligible for SSI. However, since the amount of SSI you are eligible to receive is reduced by both earned and unearned income, Your SSI payable is calculated by subtracting $20 from you monthly unearned income, such as a pension payment or a Social Security Disability Insurance (SSDI) payment if you are dually eligible. The result is your countable unearned income, which reduces your SSI payable dollar for dollar. (photo by Nabeel Syed, via Unsplash.)

The next step is to subtract $65 from your earned income (or $85 if you have no unearned income) and divide the remainder in half to find your countable earned income, which then reduces your SSI payable dollar for dollar. Note that full-time students (secondary or post-secondary) below the age of 22 have a special student earned income exclusion, which is $2,040/month up to $8,230 per year. As long as the student earns less than those thresholds, s/he has no reduction in her/his SSI payable. For this reason, it is important to report your income to the SSA every month within the first business week of the following month. If you do not report it, the SSA will not adjust your payment. As a result, they may underpay you (bad for you) or overpay you (also bad for you because they will find their mistake eventually and require you to return the overpayment).

SSDI payable is not affected at all by earned income. Nor is it immediately affected by unearned income. However, eventually, you will be deemed ineligible for SSDI if you consistently earn more than what is considered to be produced by SGA. The keyword here is “consistently”. It is important to know that Social Security evaluates your ability to perform SGA over three stages. It is also important to understand what they are looking for and what impact it will have, if any, on your monthly SSDI payment.

The first step is called Trial Work. Just as there is an updated SGA-earnings threshold for each year, there is also a Trial Work threshold, which is somewhat lower. The trial work threshold for 2022 is $970/month. If you are receiving SSDI, every time you earn $970/month, you accumulate a trial work month. Note that you cannot use work incentives, such as Impairment Related Work Expenses (IRWE) to reduce how your income is counted for the purposes of determining whether you have “used” a trial work month. Once you have accumulated nine trial work months in a rolling 60-month period, you have completed the Trial Work evaluation stage. It is really important to understand that 1) it does not matter whether you exceed the Trial Work threshold by $1 or $5,000. Either way it counts, and 2) you continue to receive your full SSDI payment during the Trial Work stage. Because of the latter, some SSDI recipients pass through the Trial Work stage without knowing they have done so.

The next stage is called the Extended Period of Eligibility (abbreviated to “EPE” as with most Social Security terms). This is a period of 36 consecutive months, during which your earned income is now compared to the current year’s SGA limit. For any month that you earn more than SGA—whether $1,350 or more in 2022—you do not receive your SSDI payment. For any month that you earn less than SGA, you do receive a check. During this three-year period, your payments may be off and on. However, as long as your earnings remain below the SGA threshold, you will receive your SSDI payments regularly. As a result, some SSDI recipients pass through the EPE, again, without knowing that they have done so.

Once you have completed your EPE, you become ineligible for SSDI from the first month you exceed the SGA threshold. This can come as a great shock to an SSDI recipient, who was not aware that s/he had already passed through the Trial Work and EPE stages. For example, consider an SSDI recipient, Dana. Dana found a job and began to work in May of 2015. From May to December of 2015, she earned $800/month, which was above the 2015 SGA threshold of $780/month. She accumulated eight trial work months. In January of 2016, she earned $830, exceeding the $810/month trial work level for 2016. During this time, she received her SSDI payments. From February of 2016 through January of 2019, Dana continued to work. Because she never exceeded the relevant year’s SGA threshold, she received her SSDI continuously throughout this period. Unaware that she had passed both her Trial Work stage and her EPE stage, Dana continued to work. In March of 2022, due to a combination of increased work hours and an increased hourly wage plus overtime, Dana earned $1,360 and her eligibility for SSDI was terminated because she had completed her Trial Work and EPE periods, and her earned income for the month exceeded SGA for 2022.

In the world of metropolitan commutes, is it useful to track both mileage and driving time. But when providing data to a government agency such as the IRS, it is important and necessary to provide them only the data that they consider relevant. While it can be useful for people who receive SSI or SSDI to track their work hours, it is important and necessary to track and report income and to understand what income counts and how that countable income can impact your benefits depending on which benefit you receive and where you are in the evaluation process.

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