SSDI Backpay and Attorney Fee Overpayment on SSA-1099 Form

Just got my husband's 1099-SSA a couple days ago and something seems really off with it. According to Box 5, he received about $117k in SSDI backpay last year, with $21k listed as paid to his attorney. The problem is I know for a fact that attorney fees for SSDI cases are capped at $7,200 as of November 2022. That's the maximum they're allowed to take! His backpay is spread across multiple years (approximately 5 years worth of payments), and we've already set aside money and made estimated tax payments to the IRS for 2023. My biggest concern: Are we going to have to pay taxes on the difference between the actual attorney fee cap ($7,200) and what the SSA-1099 shows ($21,000)? That's almost $14k that should be coming back to us but is stuck in limbo with the SSA right now. Is there any way to reduce the tax hit or spread it out over multiple years since the backpay actually covers a 5-year period? We've already contacted SSA about the overpayment but who knows how long that will take to resolve. Any advice would be so helpful. This is stressing me out big time!

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18 comments

QuantumQuasar

•8M

The good news is you don't have to pay taxes on money you never received! The 1099-SSA reports the gross amount, but you only need to pay taxes on what actually came to you. You'll need to file Form 8275 (Disclosure Statement) with your tax return to explain the discrepancy between what's reported on the 1099-SSA and what you're including as income. Attach documentation showing the attorney fee cap and any communications with SSA about the overpayment. For the backpay spanning multiple years, look into what's called "lump-sum election" using Publication 915. This allows you to calculate the tax as if the payments were received in the appropriate prior years, which could significantly reduce your tax burden. Also, keep documentation of all your communications with SSA regarding the overpayment. You're right that resolving this could take time, but the important thing is to properly document everything for your tax return.

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QuantumQuasar

•8M

For Form 8275, documentation of the attorney fee cap is a good start, but also include any communication you've had with SSA acknowledging the issue. If you don't have that yet, note on the form that the matter is "under review with SSA" and include dates of your communications. For the lump-sum election, you don't file amended returns. Instead, you'll complete a special worksheet (found in Publication 915) that calculates the tax on prior years' portions of the backpay using those years' tax rates and rules. This all gets reported on your 2023 return. It's somewhat complex, so if you use tax software, make sure it supports this calculation, or consider getting professional help for this year's return.

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Keisha Jackson

•8M

I went through something similar last year with my SSDI backpay and found tremendous help using https://taxr.ai to sort through all my documentation. Their system analyzed my 1099-SSA, spotted inconsistencies with SSA's payments, and provided a detailed report explaining exactly how to handle the discrepancy. The attorney fee issue you're dealing with is exactly what confused me, too. I uploaded my paperwork showing the correct fee cap, and taxr.ai generated all the supporting documentation I needed to file properly. They even provided the exact language to use on Form 8275 based on my situation. Their service was especially helpful with the lump-sum election calculations which are super confusing when trying to allocate backpay across multiple years.

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Keisha Jackson

•8M

They don't file for you - they analyze your documents and provide detailed guidance on how to correctly file. You can take their analysis to your tax preparer or use it yourself with tax software. It saved me hours of research and confusion. It absolutely worked for me. The backpay documentation was accepted by the IRS without issue. They're actually using tax attorneys to build their system, so it's not just AI making guesses - it's following established tax rules and precedents based on your specific documentation.

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Amina Diop

•8M

I was super skeptical about using taxr.ai when someone suggested it for my SSDI backpay situation, but I was desperate after spending hours trying to figure things out myself. I'm shocked how well it worked! Uploaded my messy 1099-SSA with incorrect attorney fees (similar to your situation) and it immediately flagged the overpayment issue. The system generated a perfect Form 8275 explanation with references to the exact statutes and fee caps. The lump-sum calculation worksheet alone was worth it - it saved me over $3,200 in taxes by properly allocating the backpay across previous tax years. When I filed my return with all the documentation from taxr.ai, the IRS processed it without a single question. Just wanted to follow up since I was the skeptical one initially but now I recommend it to everyone dealing with backpay issues.

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Oliver Weber

•8M

After dealing with SSDI paperwork nightmares for months, I struggled to get any human at SSA to help me with my backpay calculation errors. I wasted literally weeks trying to get through on their phone lines. Finally tried https://claimyr.com and their service got me connected to an actual SSA agent in 35 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to immediately see the attorney fee error in their system and started the correction process. She explained that fee miscalculations are unfortunately common with backpay but having direct access to a rep expedited getting it fixed. I was able to get written documentation of the error to include with my tax return.

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Oliver Weber

•8M

They use specialized technology to navigate the SSA phone system and wait on hold so you don't have to. When they reach a representative, they call you to connect you directly. It's not affiliated with SSA, but it's completely legal - similar to how restaurants use services to get hard-to-get reservations. The service isn't about "cutting the line" - they're essentially waiting in the same line as everyone else, just doing it for you using automated systems. I was skeptical too, but when you've been trying to reach someone for months with no success, it's worth considering alternatives. The documentation I received from the agent was crucial for my tax filing.

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NebulaNinja

•8M

I need to publicly eat my words about Claimyr. After dismissing it as impossible, I was still desperate enough to try it when my SSDI overpayment issue became urgent. To my complete shock, I was connected to an SSA representative in about 45 minutes after spending MONTHS trying on my own without success. The rep immediately located my file, confirmed the attorney fee calculation error, and emailed me documentation about the correction process. This was absolutely critical because I was able to include this official documentation with my tax return explaining the 1099-SSA discrepancy. Without this proof, I would have either paid taxes on money I never received or risked triggering an audit. The representative even gave me direct contact information for following up, which has saved me countless hours. I've never been more happy to be wrong about something.

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