TN 7 (01-07)

DI 10510.010 SGA Criteria in Self-Employment

A. Policy — SGA Criteria

SGA determinations for self-employed individuals will be based on either the general evaluation criteria, which consist of three tests or, when applicable, the countable income test.

Use the countable income test (see DI 10510.010C.) to evaluate work in self-employment performed by a title II disability beneficiary after he/she has received title II disability benefits for 24 months, if the purpose of the evaluation is to determine whether disability has ceased due to SGA.

The FO will use the three tests of the general evaluation criteria (see DI 10510.010B.) in all other cases to determine if the self-employed individual has engaged in SGA. Use the three tests when:

  • determining initial eligibility for disability benefits;

  • determining whether work in self-employment performed by a title II disability beneficiary before he/she has received title II disability benefits for at least 24 months is SGA;

  • determining whether work performed in or after the EPE/reentitlement period is SGA after an SGA cessation has been determined; and

  • determining SGA during the initial reinstatement period (IRP) for expedited reinstatement (EXR) cases.

B. Policy — Three Tests under General Evaluation Criteria

The general criteria for evaluating work activity of self-employed individuals for SGA purposes consist of three tests. The FO will consider all three tests before it can be established that the individual's work activity is not SGA. The three tests are not used if the countable income test applies (see DI 10510.010C.). The following are just brief descriptions of each of the three tests. For additional policy and procedures on applying these tests, see DI 10510.015 and DI 10510.020. See DI 10505.025D. if the individual is self-employed outside the USA.

1. Test One: Significant Services and Substantial Income

The individual's work activity is SGA if he or she renders services that are significant to the operation of the business, and if he or she receives from it a substantial income; or

2. Test Two: Comparability of Work Activity

The individual's work activity is SGA if, in terms of all relevant factors such as hours, skills, energy output, efficiency, duties, and responsibilities, it is comparable to that of unimpaired individuals in the same community engaged in the same or similar businesses as their means of livelihood; or

3. Test Three: Worth of Work Activity

The individual's work activity is SGA if, although not comparable to that of unimpaired individuals, it is, nevertheless, clearly worth more than the amount shown in the SGA Earnings Guidelines (see DI 10501.015) when considered in terms of its effect on the business, or when compared to the salary an owner would pay to an employee for such duties in that business setting.

C. Policy — Countable Income Test

1. When the Countable Income Test Applies

Use the countable income test to determine whether the work of a self-employed title II disability beneficiary shows that the beneficiary has engaged in SGA when:

  • You are evaluating work in self-employment which the beneficiary performed after he/she has received title II disability benefits for at least 24 months (under the exemption of work activity provision see DI 10510.010C.3. concerning the 24-month requirement); and

  • You are evaluating that work to determine if the beneficiary’s disability has ceased due to the performance of SGA.

2. Countable income Test

Compare the self-employed beneficiary’s countable income (see DI 10510.012) to the earnings guidelines in DI 10501.015 to determine if the beneficiary has engaged in SGA.

a. Monthly Countable Income Averages More Than the SGA Amount

If the monthly countable income averages more than the amount in DI 10501.015 for the month(s) in which the individual worked, determine that the individual has engaged in SGA unless there is evidence that shows the individual did not render significant services (DI 10510.015