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  1. #1

    Default Starting a Business While Collecting SSI and Other Public Assistance

    My post is very long. I have a TL;DR about 2/3 of the way down, and I hope there's enough information there.

    I collect DAC and SSI. I was disabled as a child; I have neurological problems, but I’m primarily limited by musculoskeletal disabilities. I won’t go into detail about my disabilities or limitations – except to say that my limitations are highly sporadic. I might be able to do a reasonable amount of work (assuming the work is conducive to my disabilities) for a couple of years, and then nearly completely unable to do any for over a year. Or, I might be limited one month at a time, for a few months – each year; etc. It’s inconsistent. Working for someone else isn’t an option – there are between one and three things I’m able to do, and I can’t find an employer for those (one requires a degree I don’t yet have.) Thus, I aim for self-employment – so I can work around the times I can’t work.

    Currently, after paying my bills and buying toilet paper, etc. (and my bills are limited – no data on cell phone service, no cable TV, no credit cards) I have about $150 to spare each month – and that’s before account for things like vehicle maintenance.

    My DAC gives me medicare and $613/mo. There’s no asset (resource) limit with this, but there’s an income limit - $1,170/mo. It has a hard limit – if I receive $1,171 in a single month, I lose it entirely – including the medical benefits, for that month (or year, as I’ll explain later.)

    My SSI gives me Medicaid (medigap) and dental/vision. It also gives me $143/mo, and has an asset (resource) limit of $2,000. After I earn $65 in one month, I begin to lose this. For each dollar I earn, they reduce my benefit by 50 cents (2:1). When my benefit becomes 0, I lose my Medicaid (medigap) coverage, meaning my dental and vision. I have MAWD, so I’d still have medigap – but no coverage at all for dental or vision. In addition, SSA(?) stops paying my medicare premium ($134). There are two programs that can cover this – QMB and Slim B.

    MAWD has an income limit of about $5,000, and an asset limit of $8,000. MAWD gives me Medicaid insurance, even my SSI (the $143) goes to 0. But, again – it would leave me without dental or vision coverage.

    QMB and SlimB pay my medicare premium if I lose my SSI check ($143). As far the benefits they provide, I believe they’re essentially the same: they both pay my medicare premium. QMB has a stricter cut-off, so I’ll only speak about SlimB: It allows me to have … $1,200? income and about $7,600 in resources, and remain eligible. They count my DAC/SSI at 100%. Thus, my $613 check counts as $613 toward my income limit. After that, they count half of my earned income. So, I can earn about $1,200 and not lose this. However, after $1,170 it becomes irrelevant because I’ve already lost medicare: there’s no medicare premium to pay if I don’t have medicare!

    Section 8 gives me assistance with paying for my housing; they pay $342 of my $550 total. For every dollar I earn after about $80 (they don’t exclude the first 80, they merely don’t make any changes until I go beyond this), they take away… 50%? of my assistance. So, I lose this entirely after I earn about $684. Also, after the first year (I’m half way there, now) they count my self-employment income the same way social security does – they average it based on the previous year.

    LIEAP (Energy Assistance) assists me on average (they only assist in the cold months, but I’m averaging for all 12) with about $30. I don’t know their income requirements, but I assume it’s similar to that of food stamps (below.)

    Food stamps – gives me $198/mo. And I use all of it – and I’m not fat and I don’t eat expensive food. I’m 130lb, but I have an absurdly high “metabolism” (or whatever it is that causes the effect often attributed to it.) … Because I’m disabled, my assistance here is tapered. I can earn $300 without losing any of this, but then it begins to taper. After earning $1,000, I’m left with only $50/mo in assistance.

    PELL Grant – Pays my tuition entirely. It tapers, too. I don’t lose any of it until I earn around 14k/yr. I don’t remember exactly how much it is, but this is the least stringent assistance to satisfy.
    In all, I receive about $704 in non-cash assistance (medicare premium, sec.8, food stamps, energy assistance) and $753 in cash assistance (soc.sec), before accounting for my PELL grant – as this isn’t used to support me. Thus, I receive about $1,457 in assistance – before attributing a value to my medicare, medicaid, vision or dental coverage.

    Social Security makes it difficult: I’m self-employed, so they will only go by estimated income for the full year – and they base this on the previous year. So, if in year 1 I earn an average of $1,171 (just $1 over the limit), I lose all soc.sec benefits and housing assistance in year 2 (this accounts for $1,095). I’d still have MAWD (which doesn’t cover vision or dental). Now, again – my disabilities are sporadic. My hope is that I can learn to work with my body, or work around by body, and not become too severely limited for an extended period. However, I can’t rely on this. Also note: the amount I earned in this example is $300 less than what I receive now - and I lost some of my medical coverage. Also note my asset limit: Social security doesn’t count my income in the first year, so to keep my Medicaid coverage for the first year, I have to keep my assets below $2,000. If I’m below $2,000, I wasn’t able to save up for the second year. Heck, even if I surrendered my Medicaid coverage – I’d still have an $8,000 asset limit from MAWD and $7,600 from SlimB – this isn’t enough to cover the tragedy that may befall me in the second year. (This isn’t an unreasonable fear, I’ve gone over a year being very limited – this happened just 2 or 3 years ago.)

    And then at this point, I’m also paying taxes – which I didn’t add in my calculations! So, my $1,170 isn’t really $1,170. In addition, my pell grant beings to lower. At this point, the loss in pell grant isn’t significant – but as my income rises above this, it becomes so.

    So, what if I earn less than 1,170? Well, if I earn – for example, $1,100 – I lose approximately (there’s no need to add this one precisely, it simply can’t work.) $800 in benefits and my dental/vision. This leaves me with $450/mo (my previous $150, plus this $300), and a $2,000 asset limit. I can’t pay for school this way, and I can’t ensure my ability to continue work: my work requires a vehicle, and at some point in my life it’s going to require more than $2,000 in assets to fix it.

    TL;DR

    If I do an LLC – my LLC’s income is counted as my income. If I do a sole proprietorship – the same thing applies. If I do an S-Corp, I’m required to pay myself a normal wage for the field. If I do a C-Corp, my business income is supposedly protected. SSA, PCH, and even food stamps will be counting my self-employment income based on my tax return; if there’s nothing on the self-employment line, they count it as 0. C-Corps pay taxes on their income, and if I retract funds from it to pay myself – we (my business and I) end up paying tax twice. However, it would allow me the possibility for either A) I'm eventually reliably making enough $$ to not need assistance, and then I can pay myself and drop my assistance. B) The business has enough assets for me to simply sell it and pay for my doctorate degree.

    I’ve already spoken to dept. of social services, and to SSA – they both told me I can do this because the corp’s income isn’t my income. However, I don’t trust them. They’ve screwed up many times, and given me completely incorrect information which affected my benefits. So, my concerns:

    Is C-corp counted as an asset? SSA told me it’s not, since I’m the owner/quasi-"self-employed." (Remember my $2k asset limit.)

    If I perform duties for this business but don’t take any income for myself, am I still performing substantial gainful activity? (AKA “Three Tests”) SSA told me no, that I’m able to volunteer all I want and I won’t be affected.

    Do they really disregard this business’ income until I pay myself? SSA and Soc.Services said this is correct.


    My other option is to take student loans and get a doctorate. However, as far as I can see – I can’t apply for IBR (income-based repayment) until after I’ve taken the loan. Also, I can’t be approved for IBR if I’m in default on the loan. So, this is what happens: I finish school, then I have to do a 2-year unpaid internship, but the loan provider wants me to start paying after … 6 months? Obviously with my income, I can’t. I also can’t be approved for IBR, because now I’m behind; I wasn’t paying.

    I’ve already considered PASS (Plan to Achieve Self Support), but this is no-go. My local benefits specialist told me that the cadre for my region hasn’t approved even one of her clients. And she’s the only specialist in this area, so it’s not as though she has a small sample size. Even if he wasn’t difficult to deal with, it would still be a big question mark: I can’t apply until shortly before I want to begin using the funds they’d give me, which means I have to finish my undergrad (another 4 years.) It’s possible, of course – but it’s not reasonable to spend another 4 years in school, full-time, for an unlikely possibility.

    I also considered doing a simple LLC and paying myself a little, and buying business equipment with the rest. That way, I have taxable income - it's not a hobby, and I'm increasing its assets. However, this won't work either - my taxes would be too high, because the nature of my business uses few, but expensive individual items. Thus, I can't deduct them as a business expenses - I can only depreciate them, making my taxes too high in the early years.

    If these are a no-go, do I have any other options – or am I simply screwed, will I forever be a leech to society?

  2. #2
    Join Date
    Oct 2014
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    8,238

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    Quote Quoting johnbrown
    View Post
    So, my concerns:

    Is C-corp counted as an asset? SSA told me it’s not, since I’m the owner/quasi-"self-employed." (Remember my $2k asset limit.)
    The stock you own in a corporation (or the member interest in a LLC) is an asset of yours. As I mentioned in my reply to your other thread on this, the value of that stock (or member interest) is the value of the corporation/LLC. So if the business is worth $50,000 then you have a $50,000 asset you own: the stock of a corporation or member interest in a LLC. That would put you above the asset limit for SSI benefits and other means tested benefits, too.

    Quote Quoting johnbrown
    View Post
    If I perform duties for this business but don’t take any income for myself, am I still performing substantial gainful activity? (AKA “Three Tests”) SSA told me no, that I’m able to volunteer all I want and I won’t be affected.

    Do they really disregard this business’ income until I pay myself? SSA and Soc.Services said this is correct.
    For Social Security, the determination of substantial gainful activity (SGA) for an employee is explained in great detail in the agency regulations: 20 CFR §§ 1571-1576. The part that explains how the determination is made for employees is found here: SGA for employees. See this link for SGA for self-employed persons.

    You might want to talk to a lawyer familiar with SSA benefits and SGA determinations for assistance. Perhaps the use of a trust might be useful here.

  3. #3

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    Quote Quoting Taxing Matters
    View Post
    You might want to talk to a lawyer familiar with SSA benefits and SGA determinations for assistance. Perhaps the use of a trust might be useful here. [/SIZE][/FONT]
    Will I be able to / how would I find one that would work for what I can afford? it's not much.

    Also, I assume any income will be taxed / will impact my benefits the same way as if I didn't have a trust (though it may effectively change my resource limit)? If so, thanks - but this won't work for me. The amount I'd earn, after accounting for what they take, will be too little to pay for school.

    Quote Quoting Taxing Matters
    View Post
    The stock you own in a corporation (or the member interest in a LLC) is an asset of yours. As I mentioned in my reply to your other thread on this, the value of that stock (or member interest) is the value of the corporation/LLC. So if the business is worth $50,000 then you have a $50,000 asset you own: the stock of a corporation or member interest in a LLC. That would put you above the asset limit for SSI benefits and other means tested benefits, too.
    That's what I expected. I know they don't count my business' assets if it's an LLC, because they're necessary for self-employment ("Property Essential for Self Support," iirc). However, they'd be giving me the advantage of both, in this case: counting it as self-employment for assets, and not counting it as self employment for tax purposes. It sounded too good to be true, but it's what they told me.

    I spoke to SSA again today, and I asked to speak to my case manager. I told her what I want to do: LLC taxed as C-Corp, so that I don't receive any income. I Specifically asked her if I get the double benefit - that I can be taxed as c-corp yet get the PESS benefit of it being self-employment. She told me I can. However, I don't trust SSA. I pushed her (politely). I told her that for my safety, I need some form of proof that they'll allow what I want to do.

    She told me to put my plan in writing and send it to them, and they'll officially accept or deny.

    See what happens. At least this way if they change their mind, I can prove it and they'll accept the fault rather than placing it on me. This is what I was told before - if I can prove it, they'll reverse the penalty.

    ------------

    I plan to send this to SSA soon:


    Clarification
    Although I collect SSA based on a neurological/developmental disability, my physical disabilities (which were not considered because there was no need to proceed any further) are significantly more limiting. My limitations from these are highly variable, and highly sporadic; I need a business so I can work around my physical limitations by scheduling only when I’m able to. This is also partly why I want to do a C-Corp and receive salary/wage income, rather than an LLC that’s taxed normally and receives self-employment income: it allows me to report monthly to SSA rather than yearly. If I do well in business in the first year, because my physical limitations weren’t too bad (sporadic) – and then in the second year I do poorly: I’m in trouble, because SSA determines my benefits in the second year based largely on my performance in the first year.

    These are my intentions:
    • Form an LLC as the sole owner/member, but elect to have it taxed by the IRS as a C-Corp.

    This prevents the business’ income from being considered self-employment income. None of the business’ income would go on my Form 1040, and therefore would not count against my income limit, regarding my SSA benefits.
    However, I hope to pay myself a currently undecided portion of the business’ earnings as salary/wage (or dividends, I’m not yet decided; if the latter is unacceptable or impossible, I’ll do the former.) I would report this portion of my income to SSA (and if appropriate, to the IRS.)

    I’ll keep the business’ funds and my funds separate (different bank accounts.) I’ll keep records of the business’ income and expenses. My business funds won’t be used to purchase or help purchase items for personal use. Or, if they are – I’ll report on that per IRS guidelines.

    As I understand: SSA will not count the business’ income against my benefits – only the portion that I pay to myself. However, SSA will also allow the advantage of not counting the business’ assets against my resource limits, under PESS (For example: if the business has $3,000 in its bank account, it will not be counted against my resource limit.)

    At least initially: my business will offer portrait photography, but may also offer other services, such as, but not limited to: computer repair.

    My questions:

    For the portion of work I perform for my business that doesn’t result in a wage or salary to me, for SGA purposes: is that considered volunteer work or self-employment work? The work I’m not paid for will only benefit the business. (If volunteer work counts the same against SGA as does paid work, this is irrelevant.) Or alternatively, will you only count against my SGA on work that I (not the business) am paid for?

    Will I be counted against twice, due to my structure? For example: if I perform work for my business so that the business earns $400, but then I take $200 for myself as salary/wage, then for SGA purposes: did I perform $400 or work, or $400+$200?

    How do business expenses impact SGA? I might earn $1,200 for the business, but without paying expenses – there is no business. Thus, it seems to me: my SGA should be less than the $1,200. If so: how is this calculated? … Note, for logical comparison: If I performed work for someone else’s business, you’d only count my wage/salary – you wouldn’t take that business’ expenses into account, without which there’d be no business to hire me…. Another way to think about it: A person could have a business that’s only mildly profitable: They might earn $1,200 for their business, but the business might have $900 in expenses. Obviously, a person can’t support himself if he has only $300 profit.

    Do sales count against SGA, or only services? For example, let’s say I earn $200 for taking pictures (the session fee, which is a service). Then, the client asks me to order prints, and I order them from a print lab and I mark up the price (profit) and resell them to her (a product/sale, not a service), does this count against my SGA? The same would be true of doing my own prints: it requires only a few minutes of work to load paper into my printer and order it to print, but the income from these products (sales) may be higher than the income from my service, which took hours.

    My requests:

    If my intentions, and my understandings listed in that section are correct, please officially confirm this. If they need to be altered in any way(s), please clarify.
    Please also clarify on my questions (my SGA ignorance.)

  4. #4
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    Have you ever requested an SSI income or resource exclusion under a PASS (Plan for Achieving Self Support)? You might get assistance from a local voc rehab counselor in completing the PASS application. What state do you live in? Is it a Section 1619b (Medicaid for working SSI recipients) state or not?

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0500810430

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0502302000


    You have a very complicated case with many moving parts. One thing for sure, don't fully rely on any advice given here.

  5. #5

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    Quote Quoting Janke
    View Post
    Have you ever requested an SSI income or resource exclusion under a PASS (Plan for Achieving Self Support)? You might get assistance from a local voc rehab counselor in completing the PASS application. What state do you live in? Is it a Section 1619b (Medicaid for working SSI recipients) state or not?

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0500810430

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0502302000


    You have a very complicated case with many moving parts. One thing for sure, don't fully rely on any advice given here.
    PASS was denied. The cadre here doesn't accept anyone (literally, at least: none of the only benefit's specialist's clients that she has sent to him. Zero.)

    I'm in SD. I can get medicaid via MAWD.

  6. #6
    Join Date
    Jan 2009
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    California
    Posts
    1,045

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    Did you appeal the denied PASS?

  7. #7
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: (Ssi+dac) Options for Becoming Self Sufficient, Considering These Problems

    If the benefits specialist's PASS applications were all denied, she is not doing something correctly. She should examine the reasons for the denial and make appropriate changes. Why was yours denied?

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