NATURE AND SIZE OF BUSINESS
The experience of the DO is of particular value in determining whether the individual
is deriving, or can be expected to derive, a substantial income from his or her business.
The detailed instructions in RS 01803.000 concerning how to derive net earnings are pertinent in the development of substantial
income in disability claims. The DO should include in its determination an account
of all the factors considered, so that it will be clear when an earnings report is
not to be taken at face value. It is especially important that a detailed explanation
be given as to the reasons why an apparently substantial business is reported as yielding
a less-than-substantial income. In farm cases, for example, the file should specifically
indicate whether real income in the form of produce is unreported for taxes because
it is being held over for sale in a succeeding year. On the other hand, a description
of special conditions affecting an individual's business may make it clear why he
or she cannot derive the income ordinarily obtained from an enterprise of that type
The type of business, amount of gross sales, the markup on products sold, and expenses
such as rent, utilities, transportation, labor, costs, profit shares to employees
and partners, etc., are among relevant items to consider.
When the business has been in existence for some time, data regarding operations in
the past (e.g., income tax returns) should be obtained for the file. (See also DI 10510.025B.)
The impressions of the field office, based on knowledge of local conditions obtained
in the investigation of earnings credits claimed by self-employed individuals, will
be particularly helpful in determining the validity of reported income and expenses.
CHANGES IN OPERATIONS DUE TO IMPAIRMENT
A business from which the individual previously derived a substantial net income may
now be expected to yield considerably less as a result of the curtailment of the individual's
work due to the impairment.
Development should show whether the individual has been obliged to cut down the size
of the business; operate the business fewer hours; hire additional labor to replace
the individual's own labor; accept the unpaid help of family members or others or
enter into a partnership arrangement so that the duties and income of the business
will now be shared with others.