Tax-ability of monthly SSD payments and Lump Sum payments

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It is not unusual for people to be concerned about whether or not they are going to get taxed on the Social Security monthly benefits or the large lump sum amount they are awarded in retroactive back pay.  Now this is determined of course on a fact by fact basis.  It is going to involve a lot of things like your overall household income and how much lump sum back pay you have received.  You need to go to your CPA at tax time and report to them all of the earnings that you have had from Social Security in terms of monthly benefits and back pay and that person will give you the correct opinion about whether or not you will be paying taxes.

As a general rule most states do not charge taxes on Social Security earnings; however, there are a few so you do need to make sure that your state is not in the category that taxes for Social Security and also if there is a lump sum back pay it may be to your benefit to file back taxes and go back and amend prior taxes returns so the lump-sum award that for example covers the period of 2011 through 2014 is applied to the monthly benefits that pertain to over the course of those three years.  Finally I would say about one-third of my clients are taxed to some degree on either their monthly benefits or especially their lump sum back pay.  In those cases, the household will be making over thirty two thousand dollars a year and it is usually involving a case where the disabled person’s spouse has a significant income.  In SSI only cases the people are living under the poverty line and so taxes will not be an issue.

This short informational blog post was provided by Anne Howard, an experienced Connecticut Social Security Disability Lawyer. Please contact The Law Office of Attorney Anne K. Howard to set up a free initial consultation.