Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-01241/USCOURTS-ca8-04-01241-1/pdf.json

Parties Involved:
Jo Anne B. Barnhart
Appellee
Robert J. Desselle
Appellant

Document Text:

1

The Honorable Fernando J. Gaitan, Jr., United States District Judge for the

Western District of Missouri.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-1241

___________

Robert J. Desselle, *

*

Appellant, *

* Appeal from the United States

v. * District Court for the Western

* District of Missouri.

Jo Anne B. Barnhart, Commissioner *

of Social Security Administration, *

*

Appellee. *

___________

Submitted: January 14, 2005

Filed: July 20, 2005

___________

Before LOKEN, Chief Judge, and HANSEN and MORRIS SHEPPARD ARNOLD,

Circuit Judges.

___________

MORRIS SHEPPARD ARNOLD, Circuit Judge.

Robert Desselle appeals the affirmance by the district court1

 of a final

administrative decision that denied Mr. Desselle disability insurance benefits under

Title II of the Social Security Act, see 42 U.S.C. §§ 401-434. Mr. Desselle challenges

the determination of the administrative law judge (ALJ) that he was not insured for

disability. We affirm.

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The Social Security Act divides each year into four three-month quarters, see

42 U.S.C. § 413(a)(1), and to be insured for disability and thereby qualify for

disability insurance benefits, Mr. Desselle must have had at least "20 quarters of

coverage during the 40-quarter period" that ended with the quarter in which he

became disabled or any later quarter in which he was disabled, 42 U.S.C.

§ 423(c)(1)(B)(i); 20 C.F.R. § 404.130(b)(2). For a self-employed claimant such as

Mr. Desselle, the Social Security Act defines a quarter of coverage as a quarter in

which the claimant's net income exceeds a statutory minimum, which varies by year.

42 U.S.C. §§ 411(b), 413(d)(2). But for years after 1977, the Social Security

Administration determines quarters of coverage by examining net income for the

entire year, rather than for a particular quarter. 20 C.F.R. § 404.143. Consequently,

to have four quarters of coverage during a particular year, Mr. Desselle need not have

worked during each quarter, as long as his net income for the year was at least four

times that year's statutory minimum for one quarter of coverage.

The ALJ found that Mr. Desselle was four quarters shy of the twenty quarters

of coverage needed to qualify for disability insurance benefits and that he had no

quarters of coverage in 1993, a year that fell within the forty-quarter period during

which Mr. Desselle was required to have twenty quarters of coverage. Mr. Desselle

contends that, in the proceeding before the ALJ, he offered conclusive evidence that

he earned enough income in 1993 to have four quarters of coverage in that year. The

evidence that Mr. Desselle presented to the ALJ included one tax return for 1993; two

amended tax returns for 1993; a completed Schedule C (a form used to report the

profit or loss of a sole proprietorship) and a completed Schedule SE (a form used to

compute self-employment tax) for 1993; a copy of a check made out to the Internal

Revenue Service to pay for Mr. Desselle's 1993 tax; and a notice of deficiency from

the IRS for overdue 1993 self-employment tax.

Mr. Desselle's initial tax return for 1993 is dated March 29, 1995, which is after

Mr. Desselle filed his application for disability in January, 1995. The initial tax

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return shows $5200 in total income, which was classified as "other income" and

described as "Handyman Income from odd jobs," and no taxes owed. Mr. Desselle's

first amended tax return for 1993, dated April 15, 1996, also shows $5200 in total

income but added $2360 in income tax owed, the calculation of which was not

explained. The second and final amended return for 1993, which is dated April 15,

1997, reclassified the income tax of $2360 owed for 1993 as self-employment tax.

Attached to the second amended return is a Schedule SE that shows $33,405 in selfemployment income for 1993, resulting in $4720 in self-employment tax and one-half

of that amount ($2360) as an income tax deduction, see 26 U.S.C. § 164(f). The

second amended return itself does not mention $33,405 and, as we have said, shows

$2360, not $4720, as self-employment tax. The Schedule C that Mr. Desselle offered

as evidence is undated and shows $3432 in net income from his business in 1993, a

figure that does not correspond to either the Schedule SE or any of the tax returns.

Mr. Desselle in 1996 paid the IRS $2360 toward his 1993 taxes, but the IRS treated

those funds as an overpayment and applied them toward overdue taxes from 1984 and

1985. After Mr. Desselle filed his second amended return, however, the IRS sent Mr.

Desselle a notice of deficiency, dated June 16, 1997, for $4720 in self-employment

tax plus interest and penalties.

Whether these tax returns are conclusive evidence of Mr. Desselle's selfemployment income for 1993 is a question that the Social Security Act answers.

Because Mr. Desselle's second amended 1993 tax return was filed within the time

limitation set forth in 42 U.S.C. § 405(c)(1)(B), because that time limitation expired,

and because the Social Security Commissioner's records of Mr. Desselle's selfemployment income contain no entry for 1993, the Act requires the Commissioner to

"include in the Commissioner's records the self-employment income" reported in

Mr. Desselle's second amended return. 42 U.S.C. § 405(c)(4)(C); Jabbar v. Secretary

of Health & Human Servs., 855 F.2d 295, 297-98 (6th Cir. 1988) (per curiam);

Hollman v. Department of Health & Human Services, 696 F.2d 13, 16-17 (2d Cir.

1982). But see Matta v. Secretary of Health & Human Servs., 806 F.2d 287, 290 (1st

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Cir. 1986) (per curiam). But since Mr. Desselle applied for disability insurance

benefits within the time limitation defined in § 405(c)(1)(B), the Social Security Act

also permits the Commissioner "to change or delete any entry with respect to ... selfemployment income in the Commissioner's records." 42 U.S.C. § 405(c)(5)(A).

According to the regulation that implements this statutory provision, the Social

Security Administration "will correct SSA records to agree with a tax return of ... selfemployment income" that was "filed before the end of the time limit" in

§ 405(c)(1)(B) "to the extent that the amount of earnings shown in the return is

correct," 20 C.F.R. § 404.822(b)(2)(i), provided that "satisfactory evidence shows

SSA records are incorrect," id. at § 404.822(a). Although this regulation does not

mirror the statutory scheme of first crediting self-employment income reported in a

timely-filed tax return and then changing that entry when one of the circumstances

listed in 42 U.S.C. § 405(c)(5) applies, the statute affords the Commissioner broad

discretion to alter records of self-employment income in this case, see 42 U.S.C. §

405(c)(5)(A), and therefore we believe that the difference between the statute and the

regulation does not have a practical effect in this instance. 

In deciding not to credit Mr. Desselle with four quarters of coverage for 1993,

the ALJ found that Mr. Desselle "did not produce satisfactory evidence to warrant

amending his earnings record for 1993." See 20 C.F.R. § 404.822(a). Because the

ALJ applied the correct regulation, we must affirm if substantial evidence on the

record as a whole supports the ALJ's decision. See Young v. Apfel, 221 F.3d 1065,

1068 (8th Cir. 2000). We already have rehearsed the inconsistencies in the tax

returns that Mr. Desselle filed, all of which postdated his application for disability

insurance benefits. Additionally, at the hearing before the ALJ, Mr. Desselle's

brother and counsel, Kent Desselle, testified that Mr. Desselle "had no input into" the

preparation of the second amended 1993 return. Instead, according to Kent, Mr.

Desselle's family attempted to reconstruct his income from checks drawn in 1993 on

the checking account of Mr. Desselle's corporation, which he treated as a sole

proprietorship. Those checks, however, do not sum to any of the numbers reported

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as income on Mr. Desselle's 1993 tax returns and, more importantly, do not show

when the money in the checking account was earned. Nor do the other business

records from 1993, which include estimates of the costs and profits of a construction

project, show whether Mr. Desselle earned a profit that year. Finally, Kent admitted

that even he could not "make heads or tails out of the [second amended 1993] tax

return" and that he "had no high confidence level that the [second amended 1993] tax

return was accurate." Indeed, when the ALJ asked him whether Mr. Desselle "may

have had a complete loss during [1993] but you can't say one way or another," Kent

answered, "That's right."

The record manifestly contains substantial evidence in support of the ALJ's

finding that Mr. Desselle had no quarters of coverage in 1993. We therefore affirm

the denial of disability insurance benefits to Mr. Desselle.

______________________________

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