The Tax Cuts and Jobs Act of 2017 (TCJA) is a major overhaul of our tax system that affects nearly everyone, including individuals, families and companies. While the law was signed in 2017, income earned in 2018 is when its impact will first be made on those filing taxes. This even includes some of those who receive Social Security benefits.
Taxes involving SSDI, SSI and workers’ comp
Most people receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) do not pay income taxes at the federal or state level. However, part of s compensation may be taxable if they receive that in addition to SSDI. Common examples of this include an injured taxpayer fails to improve and becomes permanently disabled.
Social Security benefits can be taxable when a taxpayer has both Social Security Disability and workers’ compensation. If this is the case, the workers’ comp reduces your Social Security benefits and the additional WC amount is taxable. Determining this involves using the normal Social Security benefits formula: Add 50 percent of the Social Security total to you other income.
Benefits may be taxed if:
Other exceptions to tax-exempt status
Knowledgeable guidance can help
Regardless of whether your taxes go up or down, they could change. Failure to recalculate the proper amount of taxes could mean a penalty or audit regardless of whether the wrong numbers were intentional or not.
It is never a good idea to put you disability benefits in jeopardy. Legal professionals who work with taxes can be a tremendous asset to clarifying your tax obligations, particularly if there are government benefits and subsidies involved.
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