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  1. #1
    ssibf is offline Junior Member
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    Mary Kay and SSI

    What is the name of your state (only U.S. law)? California

    My girlfriend has been on SSI for several years after a workplace accident. She would like to get off SSI, but due to her injuries cannot do any kind of repetitive work and she has limited English skills. Even office work like typing is too much for her. She has tried the ticket to work program, but the agencies she's contacted don't even return her calls.

    The one job we thought she might be able to do is sell Mary Kay. She could spread the work around to keep it to something she can manage. Initially, she would borrow a few hundred dollars from family and friends and reinvest her earnings to build inventory. Eventually, this could become a regular source of income to either reduce or eliminate her dependence on SSI.

    She talked to her worker about this, and he told her the minute she signed up for Mary Kay she would lose all her SSI benefits. Based on what I've read on the SSI page, this doesn't sound right. At the beginning, she would have well under the $2,000 resource limit, and her net income would be zero until she built up the business to a certain point.

    Can somebody on SSI start up a Mary Kay business? Could she qualify under the PASS program to get started? Or was her worker right and she'll lose all her benefits immediately?
  2. #2
    Onderzoek is offline Member
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    Quote Originally Posted by ssibf View Post
    What is the name of your state (only U.S. law)? California

    My girlfriend has been on SSI for several years after a workplace accident. She would like to get off SSI, but due to her injuries cannot do any kind of repetitive work and she has limited English skills. Even office work like typing is too much for her. She has tried the ticket to work program, but the agencies she's contacted don't even return her calls.

    The one job we thought she might be able to do is sell Mary Kay. She could spread the work around to keep it to something she can manage. Initially, she would borrow a few hundred dollars from family and friends and reinvest her earnings to build inventory. Eventually, this could become a regular source of income to either reduce or eliminate her dependence on SSI.

    She talked to her worker about this, and he told her the minute she signed up for Mary Kay she would lose all her SSI benefits. Based on what I've read on the SSI page, this doesn't sound right. At the beginning, she would have well under the $2,000 resource limit, and her net income would be zero until she built up the business to a certain point.

    Can somebody on SSI start up a Mary Kay business? Could she qualify under the PASS program to get started? Or was her worker right and she'll lose all her benefits immediately?
    It is totally incorrect that the minute she signed up for Mary Kay that she would lose all SSI benefits. Totally incorrect. Is this worker an employee of the Social Security Administration?

    Mary Kay like other home based businesses is a self employment enterprise. She would be going in to business because she wanted to make a profit on her sales. Therefore, she would be filing an income tax return and paying income tax and FICA tax on her profit. That profit would be counted as earned income and would affect the SSI benefits EVEN IF she chose to reinvest the profit back into inventory. What is the expected profit percentage on the sales?

    Earned income is countable for SSI but it is not a dollar for dollar reduction. The first $65 monthly earned income is excluded, then 1/2 the remainder is excluded. The rest is countable. For self-employment, SSI anticipates an annual profit and divides by 12 to determine monthly income.

    In order to have a PASS, you have to have income or resources that are excludable. If you have a business, generally the business assets are already excludable as long as they give you a profit.

    Possible scenerio:
    Starts this business 7/1/10. Between 7/10 and 12/10, she sells $2400 in product ($400 a month) and has a profit (including all business expenses) of 25% (I don't know what the going rate). So her net earnings from self-employment (NESE) is $600 for 2010. This would be on her Schedule C from her income tax return. SSI would divide the $600 by 12 to determine monthly NESE which would be $50. Subtract $65 earned income exclusion and none of the NESE would be countable for 2010. She would have to report all of this.

    Business picks up. In 2011, she sells $12,000 in product ($1000 per month average) and has a profit of $3000 for the year. $3000/12=$250 per month. 250-65/2=$92.50 in countable earned income (NESE) for each month in 2011. $250 a month in earned income is not going to be considered Substantial Gainful Activity (SGA) at all. She applies for a PASS and plans to put all of her profit back into the business which would mean none of it will be countable. To be approved for the PASS, she would have to have a feasible plan that shows how she is going to increase her business income and keep METICULOUS records. Would also need to have a totally separate bank account for the business so everything is obvious and above board to the SSI reviewer.

    2012 or 2013 comes along. She has tripled her sales and recruited a few new consultants and gets a percentage of their sales. Gross income $60,000 with NESE of $12,000 about $1000 per month. Countable income $1000-65/2=$467.50. She has no medical improvement - her medical condition has not gotten better but she has learned how to manage her time and resources with her limitations. Somewhere around this point, the PASS will end. The income will reduce the SSI benefits but not stop them. She will still be an SSI 1619a or 1619b recipient and still subject to all the SSI rules including resource limitations and deeming from a spouse (if you marry her or live with her and tell everyone you are married or own property together like a married couple)

    She will be paying FICA taxes and may become insured for SSDI benefits. However, if her profit exceeds the SGA threshhold for that year, she may not qualify for SSDI.

    So, it is a workable plan. There are PASS specialists throughout SSA, but not one in each office. May be 10 or 12 in the state of California. There has been a recent OIG study about PASS and SSA will be looking closely at the feasibility of the plan - is it really going to make the SSI recipient more self-supporting for the long run or is it a pie in the sky dream.

    Many many home based businesses fail so she should really research what it takes to succeed in whatever business she chooses to see if it really is a good fit for her.
    Last edited by Onderzoek; 05-29-2010 at 03:34 PM.
  3. #3
    ssibf is offline Junior Member
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    Thank you for your help.

    The person who told her she would not be eligible is her case worker at the SSA. As far as I know, he's the one who calculates her monthly payments. What happens if he incorrectly cuts off her payment? If her checks get cut off while she appeals, that may be too much of a risk.

    Also, do I understand correctly that no changes will be made until her 2010 taxes are filed? Should she report income month by month, or not report anything until 2011? Right now, she doesn't have any scheduled reviews because she has no other income and no assets.
  4. #4
    Onderzoek is offline Member
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    It is the computer system that determines payment by the inputs made by employees, not the employees arbitrarily stopping checks for no valid reason. When she starts working, she needs to make an estimate of income for 2010, estimate of what the Schedule C will show, the estimated profit. Yes, it is looking into the future. Yes it is a guess. But she is going into this business because she thinks she can make a profit. And SSI prefers to pay her correctly (or even a slight underpayment) in 2010 based on estimated income than to overpay her for 2010 and then try to collect an overpayment. But that is the nature of how self-employment affects SSI benefits. And around November, she could make a new estimate of how much she expects to make in 2011.

    If changes are not reported until the scheduled reviews, the overpayment bill can be huge.

    If she fails to report the income when she receives it, she will end up with a bill from SSI. If she reports it and keeps good records, that will be an indicator that she can manage the responsiblities of a business and a PASS (plan for achieving self support).

    A change that is reported timely if it is reported before the 10th day of the month following the month of the change event.
  5. #5
    ssibf is offline Junior Member
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    I think that clears up all my questions. Thanks so much for your help.

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