Advice from Attorney James Leeny
To qualify for disability insurance benefits, you must have paid enough taxes into the Social Security program through the Federal Insurance Contributions Act (FICA). Traditionally, these tax payments are withheld from your paycheck and paid by your employer. Paying Social Security taxes is not much different from owning any other insurance policy. An analogy that we like to use is car insurance. Think of it this way: no matter how bad your car accident was, if you didn’t pay your insurance premiums, then the insurance company isn’t going to pay for the damage to your car.
In the “gig economy,” or at times when individuals work for cash, or for family or friends, some people either don’t pay or underpay FICA, which are essentially the insurance premiums for Social Security disability and retirement. In this instance, most people only think of avoiding the “tax bite.” However, this choice can have serious consequences for those looking to apply for disability from the Social Security Administration, whether now or in the future. Some people lose their ability to qualify for disability insurance benefits altogether, while others may realize that their benefit amount is much smaller than they were hoping for.
We often take calls from potential clients who we almost certainly believe would meet the medical criteria for disability. However, as the conversation progresses, we learn the heartbreaking news that they didn’t pay enough into Social Security to qualify for disability benefits. This situation arises when a person does not have what is known as “insured status.”
To have insured status for disability benefits, you must have worked and paid into the Social Security program earning up to a maximum of 4 quarters of coverage, or QCs, per year. Once you have obtained 40 QCs, you are fully insured for retirement and disability regardless of your age. How the Social Security Administration computes a QC is a bit complicated and the SSA has a more detailed explanation on its website.
However, it is very important to understand that there is one additional requirement to have insured status for Social Security Disability Insurance (SSDI) benefits: you must have earned 20 of those 40 quarters of coverage in the past 10 years. This means that if you have not worked recently, then you may have lost your insured status despite having worked for many years over your lifetime. This is why it is crucial to apply for Social Security disability benefits as soon as soon as you become unable to work. If you become disabled, but your most recent work is too remote, then you may be ineligible for any benefits or you may only qualify for Supplemental Security Income (SSI). SSI is a program for people with little or no income. SSI typically pays a lower amount than disability insurance benefits, has more restrictions, and does not come with Medicare benefits.
We understand that tough times can force you to make tough decisions. But failing to make FICA tax contributions by working “under the table,” or by not reporting your income from driving for a ride-share company or similar job, can result in devastating consequences down the road. If you are unsure if you have been paying Social Security and Medicare taxes, you should check your paystubs or W2s. If you receive a 1099 from your employer come tax time, then your employer is not likely paying FICA taxes for you. We urge you to think carefully before putting yourself in a precarious position. You and your family may one day come to depend on Social Security benefits. Our advice: Don’t put yourself in a jam. Pay Uncle Sam.
When you are applying for Social Security disability benefits, your insured status will definitely be part of the conversation. The road to winning disability benefits can be difficult to navigate, and insured status is just one more bump in the road.
If you are disabled, unable to work, and considering applying for disability benefits, we urge you to first talk to the local Chicago Social Security lawyers at Nash Disability Law. Contact us for a free, no obligation evaluation of your situation.