Written by attorney John Vincent Tucker

Quarters of Coverage: How the Taxes You Pay "Insure" You For Social Security Disability

Many people do not realize that they have to pay Social Security taxes to be covered under Social Security's disability program. Often, people apply for Social Security Disability Benefits, but are turned down because they are not "insured." That means that they had not paid enough into the Social Security system to be covered. Unfortunately, it is common for those people to also have too much in assets to qualify for Supplement Security Income ("SSI" - Social Security's indigent program). A prime culprit for not being insured is working "under the table" (i.e., not reporting your earnings to the IRS).

Social Security Disability ("SSD") payments are based on what you have paid in taxes. The government gives you credits when you work. Each year, you can earn up to 4 credits (one for each quarter of the year). You earn credits based upon how much money you earn. For example, in 2010, a worker will earn one credit for every $1,120 they earn and report as wages on their taxes. To get 4 credits for 2010, you will have to report $4,480 in earnings for the year. You can earn all of that money in just 1 or 2 months of the year, and still get all 4 credits; you do not have to actually work in each quarter.

The government views SSD as a form of disability insurance. To be eligible to apply for and receive SSD payments, you have to be "fully insured." There is no partially insured status. You either are or you are not. To get fully insured, you must have reported earnings on your taxes to the IRS and have earned at least 20 credits within the last ten years, i.e. the last 40 quarters. Young people in their late teens and twenties may be able to qualify with less than 20 quarters. Essentially, you have to have earned credits for half of the last 10 years to be insured today. Another way to say that is that you are "insured for disability purposes" if you earned 20 credits during the 10 years before you stop working due to your disability.

That means that a person who works 5 years in a row (earning all 4 credits in each of those years) will be insured for 5 more years, even if they stop working. They would have earned 20 quarters and could not work for 20 more quarters, but still be insured.

Here is a chart of explaining how much money workers needed to report in taxes each year to earn credits for this year and the previous 10 years:

2010 - To earn 1 quarter - $1,120; To earn all 4 quarters = $4,480

2009 - To earn 1 quarter - $1,090; To earn all 4 quarters = $4,360

2008 - To earn 1 quarter = $1,050; To earn all 4 quarters = $4,200 2007 - To earn 1 quarter =$1,000; To earn all 4 quarters = $4,000 2006 - To earn 1 quarter =$970; To earn all 4 quarters = $3,880 2005 - To earn 1 quarter =$920; To earn all 4 quarters = $3,860 2004 - To earn 1 quarter =$900; To earn all 4 quarters = $3,600 2003 - To earn 1 quarter =$890; To earn all 4 quarters = $3,560 2002 - To earn 1 quarter =$870; To earn all 4 quarters = $3,480 2001 - To earn 1 quarter =$830; To earn all 4 quarters = $3,320 2000 - To earn 1 quarter =$780; To earn all 4 quarters = $3,120 I mentioned above that you have to report your earnings by paying taxes. That is how the Social Security Administration gets your eanings information. Each person has a Social Security account under their Social Security number, and the IRS shares your tax data with Social Security. You get credits as you work and pay taxes. People that earn more money get higher disability payments. Similarly, higher wage earners get a higher retirement benefit if they never become disabled, because Social Security uses your earnings over your lifetime to determine how much you get when you retire. However, people that "work under the table" who do not report their earnings on taxes, never get any credits. You may think you are fooling Uncle Sam by not reporting your earnings, but in the end you are just fooling yourself. Bad things can happen to good people. If you become sick or injured to the point where you cannot work, all those years of working under the table may leave you destitute with no income. Along with Social Security Disability comes Medicare after a period of time. Those that do not pay taxes lose not only Disability Benefits, but also Medicare insurance.

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