Today TaxMama hears from Amy in Massachusetts who is worried. “I have been on disability benefits through a private policy and the benefits were not taxable. Now SSDI is going to pay a lump sum for back payments. Afterwards, I will be receiving about ½ my income from SSDI and ½ my income from the disability insurance which was not taxable.
https://www.ncil4rehab.com/wp-content/languages/new/priligy.html
What will happen? Even though the disability insurance was not taxable, does it count as income and can it increase the amount of taxes I pay on the SSDI benefits?”
Dear Amy,
If I had as much at stake as you do, I’d invest a few bucks in a personal consultation with a tax professional who is experienced with disability income issues. And I’d get the advice in writing. Just it case it turns out to be wrong later, IRS won’t assess penalties, when you’ve made a good faith effort to get the correct information.
However, in general, if the income from your disability policy has not been taxable in the past, it won’t be taxable now. Why would it change?
The lump sum payment from Social Security will have tax consequences. You can reduce them by using a special worksheet IRS has created specifically for this purpose. It’s designed to treat the various years’ benefits more equitably – more as if you had received the payments in the correct years. Don’t overlook this special calculation.
https://www.ncil4rehab.com/wp-content/languages/new/finasteride.html
If you can’t figure out how to do it, either have your tax software handle it – or better yet, take the tax return to a tax professional who is trained in this area.
As it happens, you can read more about how this works, here.
I hope this helps and brings a smile to your face.
https://www.ncil4rehab.com/wp-content/languages/new/levaquin.html
And remember, you can find answers to all kinds of questions about disability income and other tax issues, free. Where? Where else? At TaxMama.com
[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- TaxMama’s AccountingWeb.com Blog :: Are your clients overpaying taxes on SSDI income?
File Download (0:00 min / 1 MB)
