More than 1 million people with severe disabilities became beneficiaries under the Social Security Disability Insurance (SSDI) program last year. But many of them are likely to improperly report their SSDI payments on their income tax returns, according to
“It can take months and sometimes years to receive
Up to 50 percent of
“The average monthly SSDI benefit for 2011 was
According to Gada, it’s essential that both individuals and their tax preparers understand how to report SSDI lump-sum payments. “The IRS allows taxes on SSDI lump-sum payments to be spread over previous tax years using the current-year tax return,” Gada explained. “This means recipients do not have to go through the time or expense of filing amended returns, or pay higher taxes on their current year’s income.”
People who received a lump-sum SSDI payment in 2011 will see this amount included in Box 3 of the Form SSA-1099 they receive from the
Other Money-Saving Tax Tips and Free Tax Filing Help
About 8.6 million disabled workers received income through the
• Earned Income Tax Credit (EITC). This is a refundable tax credit of up to
• Credit for people with disabilities. Taxpayers are eligible for this credit of up to
• Dependent care credit. Taxpayers who pay someone to care for a dependent or spouse with physical or mental impairments may be able to take a credit of up to 35 percent of day care costs while they are working or looking for work.
• Increased standard tax deduction. People who are blind or visually impaired may be able to take a higher standard tax deduction.
• Medical deductions. Taxpayers who itemize can deduct medical costs if those costs exceed 7.5 percent of their AGI. Deductible expenses include medical and dental costs, travel expenses for treatment, long-term care and medical insurance premiums, and costs for certain equipment for people with disabilities. Taxpayers with a chronic illness, or with a spouse or child with a chronic illness, may be able to deduct costs for attending conferences related to that illness.
• Deduct the costs of seeking SSDI benefits. Taxpayers who hired a representative such as
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