Gil Laden, NOSSCR Emeritus Member

In the summer of 1975, right after my first year of law school, I worked for Georgia Legal Services.  Shortly after I got there, on a Monday I recall, a senior staff attorney handed me a file.  He said, “You are handling an SSI hearing on Friday.”  My response: “What is SSI?”

Fast forward, some 45+ years later, as I was in the midst of figuring out my exit strategy, knowing the plan was to stop taking new clients in August, 2021, I spoke to a client who had a pending DIB claim at the local OHO (yes, in the nearly 5 decades since I heard SSI for the first time, I have added to my alphabet soup vocabulary).

I discovered she had an insured status issue – not a remote DLI, but years of no QCs, even though she had worked alongside her husband in a two-person business for a number of years.  Their CPA had advised them almost 15 years prior to attribute all of the taxable income to the husband and not to her.

She had been trying to amend her tax returns, but that was a poor solution at that.  I had a recollection of reading the POMS about 15 years ago on another issue, got side-tracked, and came across what appeared to be a nugget regarding spouse businesses I thought I ought to save.  (The then-title of the provision was husband-wife business).  In a prescient moment, I thought this could come in handy one day. I did share it on the then-Martin Listserve over a decade ago.

My client was going through cancer treatment. She filed a late request for hearing.  I helped with a good cause statement. I reached out to the HO to get that resolved early, which it was, i.e., the ALJ found good cause.

In my meeting with my client, I discovered that she had worked alongside her husband for over 20 years and put in the same degree of labor into the business.  They considered themselves to be partners but had no written agreement.  For the first few years, they divided the self-employment income as equal partners and paid taxes accordingly.  Then their CPA advised them to allocate all of the income to the husband.  Nothing had changed with the work they did prior to her illness that caused her to cease working.

The ALJ proffered an encrypted electronic nonmedical (ENM) file. (ENM files are not accessible via ERE). I saw that the field office (FO) had taken the position that because the claimant did not file tax returns for her share of the self-employment income (SEI) and pay taxes on that SEI, she lacked the quarters of coverage (QCs) to have insured status.  Further, the FO took the position that the claimant only had 3 years, 3 months, 15 days to file an amended return. In my response to the ALJ’s proffer, I argued that POMS RS 01802.334 and RS 01802.344, along with SSR 84-11 had been misapplied.

RS 01802.334A Background says the following:

Businesses are often operated jointly by spouses, but all earnings for self-employment purposes may have been reported by only one spouse, frequently spouse one. Partnership determinations in these instances are complicated because that certain outward signs of the spousal relationship are similar to the indications of a partnership. Spouses may have jointly operated a business without considering themselves partners because they did not operate under a written partnership agreement. This does not preclude a finding of partnership for Social Security purposes.

This fitted their situation precisely.  Once a valid partnership has been determined to have existed, even in the absence of a written agreement, then SSA is required to allocate the earnings, thereby correcting the earnings records of both parties.  POMS RS 01802.344.

SSR 84-11 states:

Under the Social Security Act (the Act) and the Internal Revenue Code (IRC),  many businesses that are conducted by husbands and wives may be considered operating as partnerships. Generally, a partnership is created where two or more persons join together for the conduct of a business for profit. Selected cases illustrate factors considered by courts in determining whether a partnership exists.

The ruling set forth a sampling of court cases providing insight into those factors, which aligned with the POMS.

In the absence of a written partnership agreement to the contrary, SSA was duty-bound to allocate the earnings for unbarred years and divide them equally.  As it turned out, both the claimant and her spouse contended they each provided equal labor and contributions to the business from the time they went into business over 20 years ago. (SSR 84-11 does not require an equal contribution, but once a bona fide partnership is established, then the Agency must divide the earnings and allocate proportionally. If there is no written agreement, then the allocation is split evenly).

My client’s spouse had originally provided an SSA-795 (Statement of Claimant or Other Persons) to the FO that the claimant had performed 50% of the work from 2013-2019 as he thought this was all he needed to do. After getting additional information as outlined above, I prepared another statement (I used an equivalent of the SSA-795, which is my own form with essentially the same wording, one I have used for years), for the spouse to sign.

To his credit, the CPA provided a letter acknowledging his error in not preparing tax returns as he had done previously, i.e., returns reflecting equal division of income. He provided detailed information as to their earnings. The statement from the claimant’s spouse and the letter from the CPA went toward clarifying and supporting factual assertions.  

Utilizing HALLEX I-2-5-74 Obtaining Earnings Record Information, the ALJ reached out to the FO, which produced a Report of Contact.  The ALJ had sent my response to her first proffer to the FO.  The FO agreed with my arguments.

There was further communication with the ALJ, the FO, and me on technical factors to clarify the allocation, which resulted in 2 more proffers and responses. The ALJ issued a fully favorable decision finding that there was a valid partnership agreement and the earnings for the unbarred years should be allocated equally between the claimant and her spouse.  The ALJ found the claimant to have insured status.

The claim was returned to the FO and then to DDS for development.  The claim was approved at the initial level without further appeals being needed. My client and her spouse were immensely grateful. Waxing philosophically for the moment, it was another gratifying reinforcement of the work we representatives do for disabled individuals and for those of us of a certain age can continue to do even in the twilight of our careers.

I have made available various redacted documents I have alluded to in this article.

This is a guest column. The views expressed in this column are the views of the author alone, and do not represent the views of NOSSCR, NOSSCR’s leadership, or NOSSCR’s staff.