Filing Taxes When Receiving Social Security Disability Benefits
That time of the year is almost upon us, tax season. Each and every year every citizen of the United States have to file taxes with the Internal Revenue Service (IRS). For those US citizens that work for an employer, tax season is a rather simple and straightforward. Your employer pays you a wage for your work and he/she deducts taxes from your check every week, every other week, or once a month depending on your pay schedule. At the end of the year, your employer will then provide you with a W-2 form that will tell you exactly how much money you made and how much of that money went to the federal government in the form of taxes. That information is then used to file your taxes with the IRS. For those people who receive Social Security Disability, the tax process is not so straightforward. If you or a loved one has begun receiving payment via the Social Security Administration (SSA), attorney Eric Brown, of Jones Brown PLLC would like to offer you some information that may help you better understand just how you should go about filing your taxes with the IRS this upcoming tax season.
Taxable Amounts and Social Security
It is very important that you realize that Social Security Disability payments are not always taxable. If you do not make MORE than $25,000 a year and file as an individual or your household income is LESS than $32,000 per year and you file jointly, you WILL NOT have to pay taxes on your Social Security Disability benefits. If your income exceeds either of those limits, a portion of your disability payments may indeed be taxable. So what does all of that mean? There is good news and bad news, the bad news is, you may have to pay taxes on your disability benefits if your income exceeds a certain amount. The good news is, you will never have to pay tax on all of your disability benefits. No matter how much money you make, you will never have to pay taxes on more than 85 percent (85%)of your social security Disability income.
Here are the limits set forth by the SSA & IRS:
- If you earn more than $25,000 but less than $34,000 and file as an individual or more than $32,000 but less than $44,000 and file jointly, then fifty percent (50%) of your disability income will be taxable.
- If you earn more than $34,000 if filing as an individual or more than $44,000 if filing jointly, then you need to pay taxes on eighty-five percent (85%) of your disability income.
What the exact dollar amount you are responsible for will depend on how much income you have received during the year and what tax deductions you may be entitled to.
If you or a loved one has just started receiving Social Security Disability payments and you receive a back payment from the SSA, you need to be extra cautious when filing your taxes and claiming your back payment amount as income on your tax return. Back payments are usually paid as a lump-sum amount by the Social Security Administration. This does not automatically mean that you should claim the full amount on the tax return for a single year. If you do claim your back pay as a single years income, it will put you in a higher tax bracket and you may end up paying more taxes than you are actually liable for. Instead, you should contact a tax professional that will assist you in filing amended returns for the years that the back payment may have covered and only claim this year’s payment on your current year’s income tax return.
How Much Do You Claim?
Each year the Social Security Administration will provide you with a from SSA-1099. This form will tell you how much money you received from the SSA in Socal Security Disability benefits. You will use this form to fill out your income tax return. You should consider hiring a tax professional to help you through the tax process. A tax professional can help you to understand how your Social Security Disability benefits affect your tax liabilities and can help you through the back-payment issue.
The Social Security Administration is not required to hold taxes back from your Social Security Disability payments. If you end up owing taxes at the end of the year, you can request that the SSA hold taxes back for you in the future. If you would like the SSA to withhold taxes from your Social Security Disability payments, you should contact the SSA directly and set up tax withholding arrangements.
Contact Eric Brown and Jones Brown PLLC
Eric B. Brown is an attorney based in Tulsa Oklahoma and has a robust Social Security Disability practice where he has represented clients in close to one hundred Social Security hearings since he began practicing Social Security law. He has helped Social Security claimants get benefits who have both physical and mental disabilities. He enjoys this practice because it allows him to help those whose circumstances have rendered them unable to work. He is an advocate for those who have spent their whole working lives paying into an insurance system (our Social Security Disability system) that has now denied them the benefit of that insurance at the time of their greatest need. If you should need to contact Eric Brown, you may do so by CLICKING HERE.