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Is my Disability $$ taxable?

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    Is my Disability $$ taxable?

    I have a question that I believe I already know the answer to but I'd like to hear from other people about it. When I was applying for disability, which I just received two years ago, I talk to a tax person about whether it is considered taxable income and I was told that straight disability was not as it was from previously taxed earnings. Unless I received a document from Social Security showing that it needed to go on my taxes.

    We went ahead and did our taxes for 2017 and didn't include my disability because for one, I didn't receive anything that would show I had to put it on my taxes. Yesterday though, over a year later, we get a letter from the IRS stating that the money from disability that I received in 2017 should have been put on my tax form and that because it wasn't they redid our taxes and we owe $2,100.

    My husband mistakenly included my disability income when doing our taxes this year even though he had no clue exactly how much I made because my amount had gone up a couple times during the year, basically he guesstimated it. I'm wondering if that's why they went back to 2017 and included my disability??

    I already plan to get ahold of a tax person next week but I thought I'd throw it out there for now since it's a holiday weekend and I can't talk to them until Tuesday.

    Thanks for any thoughts you guys would have on this!

    #2
    I receive a tax form from SSA (Social Security Administration) every year for my SSDI. I claim it every year. I don't think they tax 100% of what I receive.
    ~ Faith
    MSWorld Volunteer -- Moderator since JUN2012
    (now a Mimibug)

    Symptoms began in JAN02
    - Dx with RRMS in OCT03, following 21 months of limbo, ruling out lots of other dx, and some "probable stroke" and "probable CNS" dx for awhile.
    - In 2008, I was back in limbo briefly, then re-dx w/ MS: JUL08
    .

    - Betaseron NOV03-AUG08; Copaxone20 SEPT08-APR15; Copaxone40 APR15-present
    - Began receiving SSDI / LTD NOV08. Not employed. I volunteer in my church and community.

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      #3
      Disability from Social Security is taxed at the Federal level and may or may not be taxed at the State level. If your payments are from private disability, they are taxed if your employer paid the premiums and not taxed if you paid the premiums. Group employer plans are taxed. If you bought additional coverage beyond what your employer provided, that is not taxed.

      To avoid whopper payments in the future, you can have withholding of monies from each check and you have control over the percentage withheld. You also have the option of paying estimated payments quarterly.

      Comment


        #4
        You must declare SSDI when filing out tax returns. The Social Security Administration sends out a statement of gross SSDI earnings before Medicare premiums. Guesstimating isn’t smart. If you are a few cents off it will show up in their system. If you don’t have a copy of the statement from the SS a simple phone call to SSA will save you a lot of headaches. The gross amount is what goes on line ? ( I used to remember it but it is just below capital gains on the first page of Form 1040). I don’t think your husband declaring SSDI for 2018 was the reason the IRS caught this. Any income that is reported to them must be declared or they will get around to you sooner or later.

        I’m am not a familiar with all the changes since the 2017 tax reform but it used to be that if your entire adjusted gross income was less than $25,000 for a single person the SSDI is not taxed but if it is more parts of it are subject to taxation. My tax load has not changed so that was probably left unchanged. The 2017 tax reform was to stimulate the economy by greatly reducing taxes on the wealthy and corporations. The disabled and working people still pay about the same.
        That tax advisor was negligent by telling you it is not necessary to put SSDI income on the forms. You now owe the tax. If there are any penalties you might be able to hold that negligent professional accountable. You can make payment arrangements but getting away from Uncle Sam is only for a privileged few with bank accounts in the Cayman Islands.

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          #5
          The rate your SSDI is taxable is a function of your adjusted gross income, which if filing jointly as a married couple, takes into consideration your husband's income.

          We just use TurboTax and it walks you thru it. I would definitely not use the original tax consultant you did. His explanation was scary - if they don't know it can be taxable, they shouldn't be a tax accountant.
          Kathy
          DX 01/06, currently on Tysabri

          Comment


            #6
            I pretty much agree with the above responses you've received.

            I get SSDI and LTD statements of earnings tax forms from each, and also use TurboTax and enter everything thru the "walk-thru" feature. This works great for me.

            Sure sounds like you need a new tax person! Best wishes as you work thru this.

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