It’s hard enough to win Social Security Disability Insurance benefits (SSDI or “disability benefits”). Finding out that there are times when the government can get its hands-on part of your payments (in addition to being able to tax them), is disheartening indeed. But, in certain circumstances that is exactly what the government can do. Based on our experience as Social Security lawyers, we are going to take a look at when your disability benefits can be garnished and whether your benefits are taxable.
WHEN PAYING DEBTS WITH ADMINISTRATIVE OFFSETS
“Administrative offset” refers to when the government takes money that would normally be paid to you (like your SSDI benefits) and uses it to pay certain debts that you owe. Federal student loans that are in default, delinquent child support payments and unpaid taxes fall into this category.
There is a long list of federal payments that cannot be offset because they are exempt. Unfortunately, SSDI (disability benefits) is not one of them.
SSDI disability benefits were once protected from offset by the anti-assignment clause of the Social Security Act (“the Act”). The anti-assignment clause was intended to provide complete protection against government entities or persons being able to collect public or private debts from disability benefits paid under the Act.
However, exceptions have arisen in the law to allow the government to collect money from SSDI benefits in order to pay some of the recipient’s debts. Exceptions now exist for delinquent taxes, interim assistance collection, defaulted student loans, food stamp overpayments and delinquent child support debt. (Please note that for purposes of this discussion we are only talking about SSDI payments. Supplemental Security Income (SSI) benefits are not subject to these rules.)
If you owe one of these debts (and you are not paying that debt) the government can take a portion of your payments to pay your debt.
The legal process by which the government moves against your disability payments varies with the debt owed. For example, if you owe child support, the legal process used is called “garnishment.” If, on the other hand, your debt is one for food stamps you may simply receive a “Notice of Intent to Collect by Administrative Offset” letting you know that a portion of your payment will be offset.
How much of your disability benefits can be offset to pay your other debts varies according to the debt and by state as well. Nevertheless, there are limits. For non-child support debts, the general limit is no more than 15%. But as always, you should consult a social security lawyer regarding your situation.
TAXES AND SOCIAL SECURITY DISABILITY BENEFITS
When it comes to taxes, keep this in mind: The Social Security Administration (“SSA”) has two separate disability programs— SSDI (which we are discussing here) and Supplemental Security Income, or SSI.
Supplemental Security Income is a needs-based program. In other words, it is not just based on being disabled, but on having a low income. Because SSI recipients are low-income, benefits received under this program are not taxed.
The SSDI program, on the other hand, is not an income-based program. This program does not look at your income but at whether or not you are permanently disabled. As a result, money received under the SSDI program is taxable.
How much of your SSDI benefits are taxable depends on how high your income is. Because many SSDI recipients don’t have much other income, they generally do not end up paying taxes on their benefits. Of course, those who may have other household income or income from a spouse will pay taxes.
TALK TO A SOCIAL SECURITY LAWYER ABOUT YOUR DISABILITY CLAIM
If you have questions about disability benefits or have been denied benefits, contact us. We are experienced social security disability lawyers with offices throughout Arkansas, Missouri, Oklahoma, Kansas, and Illinois. We offer FREE consultations and we do not get paid unless you win your case. Call us at (618) 732-0146 or contact us online to schedule your free consultation today.