SSR 89-2a
EFFECTIVE/PUBLICATION DATE: 01/10/89
SSR 89-2a: SECTIONS 210(j)(2), 211, and 214 OF THE SOCIAL SECURITY ACT (42 U.S.C. 410(j)(2), 411, and 414)) EMPLOYER-EMPLOYEE RELATIONSHIP -- STATUS OF WORK FOR A CHURCH EXEMPT FROM INCOME TAX
20 CFR 404.1007 and 404.1025(b)
- The claimant, born December 23, 1920, applied for old-age insurance benefits (OAIB) on March 4, 1985, but her application was denied because she had only 21 of the 31 quarters of coverage that she needed to be fully insured. At a hearing before an administrative law judge (ALJ), the claimant contended that she had performed secretarial work for a church from 1981 through 1983 and that she had reported the earnings that she had received from this work as self-employment income. The ALJ agreed with the claimant that she had been self-employed from 1981 through 1983 and found that, in view of her self-employment income in those years, her earnings record should have been credited with an additional 12 quarters of coverage. Accordingly, the ALJ concluded that the claimant was fully insured and thus, entitled to OAIB. The Appeals Council (AC) decided to review the ALJ's decision. The AC noted that the factors for determining whether a person is considered employed or self-employed are contained in 20 CFR 404.1007. In this case, application of the factors showed that the claimant had been an employee of the church during the above years. First, the church had provided the claimant with a place to work and with office supplies even though the claimant chose to do the work elsewhere on occasion. In addition, the claimant had not incurred any expenses in connection with her services, had not been in a position to suffer a loss, had not worked for any other firm, and had not advertised to the general public that she was available to do secretarial work. (The claimant had testified that she had not been available for other work because she had not wanted to work more than part-time.) The AC also noted that the claimant's payment of Social Security and Federal income taxes as a self-employed person on the work that she had performed for the church during the years in question did not preclude a finding that she had been an employee during those years. The AC concluded that, while any one particular factor in 20 CFR 404.1007 may not have shown that the claimant had been an employee of the church, the evidence of the record as a whole did support such a finding. Under 20 CFR 404.1025(b), work done before 1984 by an employee of a religious organization which was exempt from income tax under section 501(a) of the Internal Revenue Code did not constitute covered employment unless a waiver certificate (form SS-15) had been filed with the Internal Revenue Service. The AC found that, because there was no indication that such a waiver had been filed, the claimant's work for the church from 1981 through 1983 constituted noncovered employment. In reversing the ALJ's decision, the AC held that the claimant was not fully insured and thus, was not entitled to OAIB.
On March 4, 1985, the claimant, born December 23, 1920, filed an application for old-age insurance benefits (OAIB). She stated that she had been an employee of a church from March 1983 through June 1984, that she had not been self-employed from 1983 through 1985, and that she would have no earnings in 1985. She did not know the amount of her 1984 earnings.
The claimant later explained that, in June 1978, her husband was appointed Superintendent of their church and that he had paid her about $200 per month to do secretarial work for him. The claimant reported this work as self-employment income for 1981 through 1983, and inasmuch as she had no expenses in her "business," she did not complete a Schedule C for any of those years. The claimant further stated that the church had been the source of funding for her earnings; and that, inasmuch as the church was a nonprofit organization, it had chosen not to pay Social Security taxes on her earnings and to treat her as a self-employed individual. She had set her own hours and had worked both in her own home and in her husband's office space, which was connected to their home.
The Social Security Administration (SSA) determined that the claimant had not been a self-employed individual but rather an employee of the church. SSA further determined that her work was not covered for Social Security purposes and that she was not entitled to OAIB. Without the self-employment income for 1981 through 1983, the claimant had only 21 of the 31 quarters of coverage that she needed for fully insured status.
The initial determination was affirmed upon reconsideration. SSA reasoned that the claimant had not been self-employed because: 1) she had not advertised her secretarial services to the public; 2) she had not obtained any sort of business license; 3) she had not performed services for any other "employers;" 4) she had not filed self-employment tax returns for the years 1978 through 1980, despite her allegation that she had always held herself out as self-employed; and 5) she had not filed her 1981 self-employment tax return until August 1984 or her 1982 self-employment tax return until October 1984. SSA believed that the lack of self-employment tax returns for 1978 through 1980 and the late-filed returns for 1981 and 1982 indicated that the claimant had not considered herself to be self-employed when she was performing secretarial work for her husband.
The administrative law judge (ALJ) agreed with the claimant that she had been self-employed from 1981 through 1983. In his decision, the ALJ found that the claimant's earnings record should have been credited with earnings of $2,400 for 1981, $2,000 for 1982, and $1,800 for 1983, along with 12 quarters of coverage, and that she had a total of 33 quarters of coverage. The ALJ concluded that the claimant was fully insured and, therefore, was entitled to OAIB.
The Appeals Council (AC) reviewed the ALJ's decision and concluded that it was erroneous. 20 CFR 404.1007 provides factors for determining whether an individual is considered employed or self-employed under the law. The AC was of the opinion that these factors showed that the claimant had been an employee of the church because the church had provided her with a place to work and with office supplies. The factors further showed that the claimant had not been self-employed because she had not incurred any expenses in connection with her services, had not been in a position to suffer a loss, had not worked for any other firm, and had not advertised to the general public that she was available to do secretarial work. The claimant testified that she had not been available for other work because she had not wanted to work more than part-time. The AC noted that the claimant's payment of Social Security and Federal income taxes as a self-employed individual did not preclude a finding by SSA that the claimant had been an employee of the church.
Under 20 CFR 404.1025(b), work done before 1984 by an employee of a religious organization described in section 501(c)(3) of the Internal Revenue Code which is exempt from income tax under section 501(a) of the Code is not covered employment for Social Security purposes unless a form SS-15, "Certificate Waiving Exemption From Taxes Under The Federal Insurance Contributions Act," was filed with the Internal Revenue Service. Inasmuch as there was no indication that such a form had been filed, the AC found that the earnings which the claimant had received from the church were not covered for Social Security purposes and thus, that no quarters of coverage had resulted from that work.
In response to the AC's notice of proposed action dated September 17, 1987, the claimant's representative essentially repeated his prior contention that the claimant had been self-employed from 1981 through 1983. In particular, he pointed out that the Treasurer of the church had submitted an affidavit stating that the claimant had been self-employed, and that the person who had hired her (i.e., her husband) had testified that she had been considered to be self-employed.
The representative also responded to the AC's rationale for believing that the claimant had been an employee of the church. The representative contended that an individual need not advertise to the general public to be considered self-employed, and that the AC's statement that the claimant had not incurred any expenses was not entirely accurate inasmuch as the claimant had testified that "she owned a typewriter." He further contended that the claimant's self-employed status was evidenced by her testimony that she had performed work not only at the church office, but also at both of her homes.
The AC was not persuaded by these contentions. The claimant had stated that she had not completed a Schedule C for the years 1981 through 1983 because she had not incurred any expenses in connection with her business during those years. Neither the claimant nor her representative submitted any documentary evidence to rebut the claimant's prior statement. Although the claimant had testified that she had done some of her secretarial work at both of her homes as well as at the church offices, the AC believed that this did not constitute proof that the claimant had been self-employed, inasmuch as the church had provided her with a place to do her work, but she had chosen to do it elsewhere on occasion. The AC believed that, while any one particular factor item in 20 CFR 404.1007 may not have shown that the claimant had been an employee of the church, the evidence of record as a whole did support such a finding. Therefore, in reversing the ALJ's decision, the AC concluded that the claimant was not fully insured and thus, was not entitled to OAIB.