Although we primarily do workers compensation, we also do quite a bit of Social Security work. I had the recent misfortune to do an intake on a couple whose working circumstances are not usual. The one member stopped working in 2001 to take care of sick parents. The other part of the couple worked doing adult foster care. The pair were told by the state employees that they dealt with that this was a tax-exempt business and they didn’t need to pay taxes, including Social Security taxes.
One member of the couple was suffering from fibromyalgia and lupus, while the other was doing the bulk of the work. That person suffered a stroke and became disabled from everything.
Both members of the couple are applying for Social Security disability, but unfortunately, neither will be able to access Social Security disability because they haven’t paid Social Security taxes recently enough to qualify them for Social Security disability.
The Social Security Administration requires that people prove they are disabled from all gainful suitable employment for 12 consecutive months. They also require that the disability begins within 5 years of when that person was last employed paying in Social Security taxes.
What most people don’t understand is that Social Security is really an insurance program. By paying Social Security taxes, a person makes themselves eligible and keeps themselves eligible for Social Security disability and Medicare if they become totally disabled from gainful suitable employment prior to their normal retirement age.
A person also needs to pay into the Social Security Administration to qualify for a Social Security benefit when they do retire. The amount of that benefit is a function of how much money has been paid in over a person’s lifetime.
While it may make sense if you are self-employed not to pay into the Social Security Administration, you must, nonetheless, save significant amounts of money to protect against the possibility of becoming disabled, and to prepare yourself for retirement.
I am self-employed, but I make sure that my office pays into the Social Security Administration each and every month so that I will be able to access a reasonable return from the Social Security Administration when I retire. I have had the unpleasant responsibility of explaining this to people at a very difficult time in their lives. The timing of it is usually when a person really needs those Social Security benefits, either for disability or retirement, and they find out that they don’t have the money paid in and they’re not able to get any help for their retirement or their disability. It is an unpleasant conversation, and it would certainly be good for people to have an understanding of how Social Security works before needing it.