Probably not, but this depends on the amount of your total income. Most people won’t have to pay taxes on their Social Security disability benefits. Couples whose combined incomes exceed $32,000 and individuals with income exceeding $25,000 will pay income tax on a portion of their Social Security disability benefits. The IRS has an odd way of figuring out total income for this rule. The IRS uses adjusted gross income as reported on Form 1040, plus one-half of the total Social Security benefits received for the year, plus non-taxable interest.

Single people with incomes over $34,000 and married people with incomes over $44,000 pay tax on a higher percentage of their Social Security disability benefits.

Here’s an odd thing: People whose Social Security benefits are reduced because of the worker’s compensation offset or offsets for other public disability benefits must count the amount of Social Security benefits not paid when determining taxability of their benefits. But if a child receives benefits on a parent’s account, those benefits count only for determining if the child must pay taxes on Social Security benefits received.

If you fall into the group of people who may be taxed on Social Security disability benefits only because you received a large check for past-due benefits during the year, you still may not have to pay tax on your Social Security benefits. Th
e IRS has set up a way to recalculate your back benefits and consider them received in the year you should have gotten them rather than in the current year. Ask the IRS for a copy of Publication 915.

If your Social Security disability benefits end up being taxable, note that a portion of the attorney’s fee may be deductible. However, this depends on the “2% of adjusted gross income” ceiling on miscellaneous itemized deductions. If you have to repay a long term disability insurance carrier because of receipt of Social Security disability benefits you may get special tax relief. Ask the IRS for Publication 525.

The Social Security Administration is supposed to send you a Form 1099 by February 1st of the year after your back benefits are paid. If you will have to pay taxes on your Social Security disability benefits, be sure to compare the information on the Form 1099 with the information on your Notice of Award. The Form 1099s from the Social Security Administration are often wrong. You will need to bring any errors to the attention of your tax preparer. For this reason it is important for you to keep track of how much you actually receive from the Social Security Administration.

Tax law is very complex. Please talk to a tax specialist if you have any questions about taxes on your Social Security benefits.

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