Will My Tax Refund Be Reduced If I Get SSDI Or SSI?

Parmele Law FirmUncategorized

Every year in April millions of workers across the country rush to meet the tax deadline. April 15 is the date by which every American has to file their tax return, and most hope for a fat refund. All year long workers pay into the system, hoping it is enough not to be hit with a big tax bill. In fact, most of us do our best to manage our withholding so when we file our return the IRS has to pay us back because we have paid too much over the year. Income taxes are just that, based on income. So what happens if you do not work and rely on other sources for support? Do you have to report sources of income that do not come from working, and if so do you have to pay taxes on that income? Getting the answers to these questions helps you budget, and also prepares you for the possibility that Uncle Sam may come knocking on your door in April for payment.

The first question is whether you have to report Social Security Disability Income (SSDI) or Supplement Security Income (SSI) on your tax return.  Because the Social Security Administration (SSA) offers benefits other than SSDI and SSI it is helpful to look at each type of benefit:

  • Monthly retirement benefits: do have to be reported on your taxes.
  • Survivor’s benefits: do have to be reported.
  • Disability benefits: do have to be reported on your tax return.
  • SSI: does NOT have to be included in a tax return.

For the types of benefits that you are required to report, a special form must be used. We understand how hard it was to get SSDI and other benefits and that the amounts are not always enough to live on, let alone pay taxes. Keep in mind though, that just because you have to report the payments does not mean you will receive a large tax bill. Most people only end up paying taxes if they have other sources of income that boost their overall bottom line. It might be that your spouse works and earns a good wage, if so you can be subject to taxation based off of that income and not necessarily on what you get from the SSA. Another instance that may cause you to owe taxes on disability benefits is receipt of retroactive payments. We all know it takes some time for SSDI to be approved, but once it is approved there is the possibility of substantial back pay. If you claim all of this income in one year, it will skew your numbers and cause your income tax return to be thrown out of whack. The best approach is to report the income for the appropriate years, which will take the help of a qualified professional to determine. We can help you with your SSDI questions and let you know what to expect when it comes to taxes. To make certain you have not made a mistake on your tax return, an accounting professional should be consulted.

If you have questions about how your SSDI and SSI benefits are counted for tax purposes, call an experienced attorney for help. Contact us online today for more information. We can also be reached at 855-727-6353.