Is Social Security disability backpay taxable income for IRS purposes?
I just received a large SSDI backpay amount after finally getting approved - took almost 2 years! Now I'm worried about taxes. Does anyone know if Social Security disability backpay is considered taxable income? Do I need to report it all on this year's tax return even though it covers payments from previous years? I've heard conflicting things and don't want to get in trouble with the IRS.
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Avery Saint
Yes, SSDI backpay can be taxable, but it depends on your total income. If your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds $25,000 for individuals or $32,000 for couples filing jointly, then up to 50% might be taxable. Above $34,000 individual/$44,000 couple, up to 85% could be taxable. The good news is that the IRS allows something called "lump-sum election" where you can apply the backpay to previous tax years when it should have been paid. This might lower your overall tax burden. You'll need to talk to a tax professional though - it gets complicated.
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Ryan Vasquez
•Thank you! That's helpful but also scary. My backpay was about $31,500 and I have some other income from part-time work before I became disabled. Sounds like I definitely need to talk to a tax person. Do you know if I need to file amended returns for the previous years?
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Taylor Chen
WATCH OUT!!! When I got my backpay last year the SSA didn't withhold ANY taxes and I got hit with a HUGE tax bill!! They should warn people about this!!! You can request voluntary withholding but most people don't know that until its TOO LATE!!!
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Keith Davidson
•This happened to me too! I was shocked when tax time came. I ended up setting up a payment plan with the IRS because I couldn't pay it all at once. Now I have them withhold taxes from my monthly SSDI payments so I don't have this problem again.
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Ezra Bates
my brother got backpay last yr and didnt pay any tax on it the ssa lady told him disability isnt taxable so idk why everyone saying it is
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Avery Saint
•Your brother might have been confused. SSI (Supplemental Security Income) generally isn't taxable, but SSDI (Social Security Disability Insurance) can be taxable depending on your total income. Many people mix up these two programs, and sometimes even SSA representatives don't explain the distinction clearly.
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Ana Erdoğan
When I got my backpay, I called Social Security to ask about taxes and spent FOUR HOURS trying to get through just to be disconnected! I ended up using Claimyr (claimyr.com) to reach an agent in under 5 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU The agent explained that I should get a SSA-1099 in January showing my total benefits for tax purposes. They also helped me set up voluntary tax withholding from my monthly payments going forward, which has been a huge relief.
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Ryan Vasquez
•Thank you for the tip! I'll check out that service - I've been trying to call about this for days with no luck. Would be worth it to actually get some answers about the tax situation.
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Sophia Carson
SSA will send you a form 1099 in January showing how much you received during the calendar year. That's what you use for your taxes. I think you also get a letter showing which months the backpay covers if you want to try that lump-sum election thing someone mentioned.
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Elijah Knight
This happened to me a few years ago and I almost had a heart attack when I saw how much I owed! I wish someone had warned me. My tax guy did some kind of special calculation that helped though.
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Ryan Vasquez
•Did your tax person file amended returns for previous years? Or did they do something on the current year's return? I'm trying to figure out the best approach.
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Elijah Knight
•No amended returns! They did worksheets for the previous years as part of THIS year's return. It's called a lump sum election. Saved me about $1200 in taxes! Definitely get a professional though - it's complicated.
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Avery Saint
To clarify on the lump-sum election method - you don't actually file amended returns. Instead, your tax preparer will do calculations showing what your tax would have been in previous years if the benefits were received then. Then they compare that to your regular calculation and use whichever method results in lower taxes. IRS Publication 915 explains this, but it's definitely worth paying a tax professional who understands Social Security taxation.
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Ryan Vasquez
•That's a huge relief! I was dreading having to go back and redo multiple years of taxes. Thanks for explaining!
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Keith Davidson
One more thing to consider - if your backpay pushed you into a higher tax bracket, you might want to look into making a last-minute contribution to a traditional IRA (if you had any earned income) to reduce your AGI. This could potentially lower how much of your SS benefits are taxable. Talk to your tax advisor about this strategy.
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