The cycling of money through the Social Security system can be confusing. Forbes recently undertook to explain one facet of it: the several ways in which Social Security Disability Insurance income can be taxed by the same federal government that writes SSDI benefits checks.
Forbes contributor Peter J. Reilly notes that SSDI income is taxed like Social Security retirement benefits income is taxed. That is, incomes from both Social Security programs can be fully exempt, or 50 cents of each dollar can be taxable or 85 cents of each dollar can be taxable.
Reilly states that all Social Security retirement income and SSDI benefits income is at least partially exempt from federal taxation.
The different taxation levels are dependent on how much a beneficiary receives in a year and how much other taxable income that person has in that year.
Reilly writes that in general, someone who has little other income will not see their Social Security Disability income taxed on April 15. One exception to this: when someone receives an initial lump sum from SSDI.
The lump-sum event happens if you apply for SSDI, get turned down, file an appeal with the help of an attorney and win the appeal. You will then get a lump sum for the back pay owed (the money tallied from the time of your initial SSDI application).
The Forbes article also lays out a dire tax scenario that a few unfortunate individuals fall into when they are disabled by a work injury and turned down for North Carolina workers’ compensation benefits. They can be hit with both taxation and benefits repayment issues involving long-term disability benefits, SSDI and workers’ comp.
For most workers disabled by injury or illness, the top priority will be having their SSDI application approved. Because approval often involves the complex appeals process, it makes sense to speak with a qualified SSDI attorney in Charlotte.