The Earned Income Tax Credit is a refundable tax credit for low to moderate income working people. This Tax Credit incentivizes work while providing additional support to low income workers, particularly workers with children. People working part-time often receive the Earned Income Tax Credit. And some of those workers have applied for social security disability benefits. They are working part-time because of their disability and are unable to work full-time.
However, some people file taxes stating they are self-employed so that they receive the Earned Income Tax Credit. And some of those people aren’t actually earning self-employment. When you file taxes for earnings you did not actually earn, it is fraud. It is both tax fraud and social security fraud. The Social Security Administration receives information from the Internal Revenue System to determine what benefits a claimant is eligible for and how much they are eligible for monthly. Claimants become entitled to Disability Insurance Benefits (Title II) based on their taxable earning during their lifetime.
Even what seems like an insignificant amount of work can make a difference in eligibility for Disability Insurance Benefits. If you file taxes regularly for earning you didn’t actually earn, you might qualify for Disability Insurance Benefits erroneously. And those fraudulently reported earnings can inflate the amount you are paid monthly.
At social security hearings, the judge will ask about past work. She will have information about earnings from the IRS. When there is self-employment listed on a claimant’s earning record, she will ask the claimant what they did to earn that money. The judge will ask about hours worked, rate of pay, and records kept. Claimants testify under oath at Social Security Disability hearings. It is important that all claimants tell the truth. Additionally, the Social Security Administration is taking steps to examine self-employment income and determine if it is legitimate. If it is not legitimate, the earnings are removed from the earning record. Someone who has committed fraud might find themselves in an overpayment situation with the Social Security Administration and will be reported to the IRS for fraud.
If you have an issue with your earnings or taxes, you need to speak to your attorney about it as soon as possible.