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No Fees Unless We Win

(608) 784-4370

FAQ About Social Security Disability Benefits & Tax Obligations

Most U.S. citizens who work and earn an income are required to file a federal tax return each year. If you have an employer, this is a fairly straightforward process, as taxes are automatically deducted from your paychecks, and you will receive a W-2 with all of the information necessary to complete your return. However, if your income comes from Social Security disability benefits, understanding your tax obligations can be more challenging. Below are the answers to some of the most common questions beneficiaries have when preparing for tax season.  

What to Know About Social Security Disability & Taxes 

Are disability benefits taxable? 

Whether or not you must pay taxes on your Social Security disability benefits depends on how much income you receive and your filing status. If you file as single and earn $25,000-$34,000, you may have to pay taxes on up to 50% of your benefits. If your income is more than $34,000, benefits can be taxed up to 85%. When filing a joint return with your spouse, up to 50% of your benefits may be taxable if your combined income is $32,000-$44,000. Benefits can be taxed up to 85% if your combined income exceeds $44,000. 

Are taxes withheld from my benefit payments?

The Social Security Administration will not automatically withhold taxes from your disability payments. If you think you may owe taxes when it comes time to file your return, you can request that the SSA take taxes out for you. This will prevent you from being surprised by a high tax bill at the end of the year. 

Will a tax refund affect my disability eligibility? 

Tax refunds are not considered to be a form of income for disability beneficiaries. The SSA is only interested in money you earn through work when determining eligibility for benefits. As such, getting a refund won’t impact your payments. This is also the case if you get an Earned Income Tax Credit or Child Tax Credit. 

How should I report a back payment on my return?

In many instances, Social Security disability applicants are initially denied benefits and then receive a lump sum back payment after winning an appeal. This can be a substantial amount that forces you into the next tax bracket. In turn, you could end up paying more taxes than you’re really liable for. Thus, it’s advisable to file amended returns for the years that correspond with the back payment and only report the current year’s income on your most recent return.  

If you are applying for Social Security disability or have recently started collecting benefits, the attorneys at Fitzpatrick, Skemp & Associates, LLC can explain the tax laws that apply to your specific situation. They will also provide effective representation if you are denied benefits and need to file an appeal. For nearly two decades, they have been entrusted to help residents throughout La Crosse County, WI, get the maximum benefits they deserve. Call (877) 784-1230 to schedule a consultation or visit their website to learn more about the legal services they offer.