Tax season is here, and we have answers to your questions about Social Security disability taxes. When you’re employed by a company who issues you paychecks and a W-2 at the end of the year, taxes are simple. However, if you are a Social Security beneficiary, your taxes may be more complicated. Our experienced lawyers at Phillip M. Hendry, Attorney at Law can answer your questions and walk you through the process of filing taxes as a Social Security disability beneficiary. Call us today to begin the complex process of filing Social Security disability taxes.
Is Social Security Disability Taxable?
You may not have to pay taxes on your disability benefits. If you file taxes as an individual and make less than $25,000, you do not have to pay Social Security disability taxes. Similarly, if you file taxes jointly and your total combined household income is less than $32,000, you do not have to pay taxes on your disability payments. However, if your individual or joint incomes exceed these amounts, you may have to pay taxes on some of your benefits.
Your Social Security disability taxes are limited to the following amounts:
- Only 50 percent of your SSD income will be taxable if you file taxes as an individual and earn more than $25,000, but less than $34,000, or if you file taxes jointly and earn more than $32,000, but less than $44,000.
- Only 85 percent of your SSD income will be taxable if you earn more than $34,000 individually or more than $44,000 jointly.
Although you may owe taxes on some of your disability benefits, you will never have to pay taxes on more than 85 percent of your SSD income. The exact amount of Social Security disability taxes you owe depends on your income and the tax deductions and credits to which you may be entitled.
How Do Back Payments Affect Taxes?
It can take years to be approved for Social Security disability benefits. When you are finally awarded benefits, you are often eligible for a large back payment that is paid as a lump sum. If you claim that total amount on your current tax year, you may be pushed into a higher tax bracket and owe a larger percentage of Social Security disability taxes. However, you should instead amend prior years’ tax returns to reflect the amount of back pay awarded for each past year. Only this year’s benefit amounts should be claimed on your current income tax return.
A tax or legal professional can walk you through the process of amending prior years’ tax returns as well as making sure your current tax return is filed appropriately. You may need to file multiple tax documents to correct past taxes in order to correctly file taxes on a large back payment.
How Much Should I Claim?
At the end of the year, the Social Security Administration will mail you a SSA-1099 form that will state how much money you have been paid in benefits. This form can be used to complete your income tax return. If your back payment is listed on the SSA-1099, you may have to refer to legal documents or request additional information from the Social Security Administration so that you can amend prior years’ returns.
If you had a Social Security disability lawyer help you apply for benefits or appeal your claim, you may contact them for more information about your benefits and back pay. Although they do not have your SSA-1099 form, they do have information about your awarded benefits.
Withholding Taxes From Your Social Security Disability Payments
The Social Security Administration will not withhold taxes from your benefits unless you make a formal request that they do so. Because Social Security disability taxes are typically low, most people choose not to have the government withhold taxes from their benefits. However, if you typically owe taxes at the end of the year or if you are worried that you might owe, you can call the Social Security Administration and ask them to withhold taxes from your benefits.
A Social Security Disability Taxes Attorney Can Help You
Applying for Social Security disability benefits and appealing denials can take years. The process is long and complicated, often requiring the help of an experienced legal professional. However, even after you are awarded benefits, you may face many new questions. Dealing with Social Security disability taxes can be difficult. You may be unsure of how much you made as well as what you owe. The skilled attorneys at Phillip M. Hendry, Attorney at Law can help. Call us to find out more.