1. Social Security will ask the individual to estimate the of the cash or in-kind withdrawals. Social Security will deduct that amount from the cost of goods sold or the cost of expenses incurred on the profit and loss statement to arrive at the proper NESE. 2. If the individual cannot or will not provide the profit and loss statement, but alleges an amount of NESE, Social Security will add the value of the withdrawals to the individual’s allegation of NESE. 3. If an individual alleges withdrawals for personal use but cannot or will not estimate the of the withdrawals, or if the individual’s personal expenses exceed the stated NESE and no other income is available, Social Security will develop for unstated income. CWICs should be aware that when an individual diverts money from a business to personal use without accounting for it through the business financial records, it is against IRS rules for both small business and individual income reporting. Beneficiaries should never be encouraged to do this under any circumstances! All income attributable to the business should be deposited into the business account (not a personal bank account) and must be reflected in the profit and loss statements for the business. Business Structures May Affect How Social Security Counts NESE There are numerous ways that small businesses may be structured and different business structures are treated in different ways when Social Security is determining how much income to attribute to a beneficiary when conducting SGA determinations and determining how much in SSI is due. Business structure can also affect how the SSI program looks at the business assets when making resource determinations. The structure of a business matters and it is an important issue about which to counsel beneficiaries. There are basically five types of business structures which are summarized below: Sole Proprietorship The easiest way to form a business is as a sole proprietor and – most small businesses have this structure. The business owner and the business are essentially the same. There is no need for legal documents and there are no filing requirements other than the IRS Schedule C in the individual tax returns. A sole proprietor does not even need a federal employer ID number, but can do business under the individual owner’s Social Security number. Partnership Partnerships are used when more than one person is involved in the – ownership of the business. The partners share in income and expenses based on their percentage of ownership share in the partnership.
1. Social Security will ask the individual to estimate the of the cash or in-kind withdrawals. Social Security will deduct that amount from the cost of goods sold or the cost of expenses incurred on the profit and loss statement to arrive at the proper NESE. 2. If the individual cannot or will not provide the profit and loss statement, but alleges an amount of NESE, Social Security will add the value of the withdrawals to the individual’s allegation of NESE. 3. If an individual alleges withdrawals for personal use but cannot or will not estimate the of the withdrawals, or if the individual’s personal expenses exceed the stated NESE and no other income is available, Social Security will develop for unstated income. CWICs should be aware that when an individual diverts money from a business to personal use without accounting for it through the business financial records, it is against IRS rules for both small business and individual income reporting. Beneficiaries should never be encouraged to do this under any circumstances! All income attributable to the business should be deposited into the business account (not a personal bank account) and must be reflected in the profit and loss statements for the business. Business Structures May Affect How Social Security Counts NESE There are numerous ways that small businesses may be structured and different business structures are treated in different ways when Social Security is determining how much income to attribute to a beneficiary when conducting SGA determinations and determining how much in SSI is due. Business structure can also affect how the SSI program looks at the business assets when making resource determinations. The structure of a business matters and it is an important issue about which to counsel beneficiaries. There are basically five types of business structures which are summarized below: Sole Proprietorship – The easiest way to form a business is as a sole proprietor and most small businesses have this structure. The business owner and the business are essentially the same. There is no need for legal documents and there are no filing requirements other than the IRS Schedule C in the individual tax returns. A sole proprietor does not even need a federal employer ID number, but can do business under the individual owner’s Social Security number. Partnership – Partnerships are used when more than one person is involved in the ownership of the business. The partners share in income and expenses based on their percentage of ownership share in the partnership.