Social Security Disability Taxes on Benefits - SSI & SSDI

Did you apply for Social Security Disability benefits and has your claim approved by the Social Security Administration? If you receive Social Security benefits, including SSI and SSDI, you may have to pay taxes on your disability benefits.

How Many People Pay Taxes on Social Security Disability Benefits?

Less than one-third of the Social Security Administration's current beneficiaries are required to pay taxes on their disability benefits.

What Determines If I Pay Taxes On My Disability Benefits?

You will have to pay federal taxes on your benefits if you meet certain requirements. You will have to pay taxes in 2009 if:
- You file your federal tax return as an "individual" and your total income is more than $25,000
- You file a joint return and you and your spouse's total income is more than $32,000

If you are required to pay federal taxes on your benefits, you can request to have the taxes withheld from your Social Security check.

Tip: Many state and local authorities do not tax Social Security Disability benefits.

Should I File for a Tax Return?

Even if you are not required to file a tax return by the IRA, you should still file a tax return.

You should file a tax return because you may be able to:
- Get a tax refund
- Take advantage of any tax breaks
- Take advantage of credits like the Earned Income Tax Credit, which could reduce your taxes
- Qualify for various forms of financial assistance

What Types of SSDI Payments are Subject to Tax?

There are two types of SSDI payments that are subject to tax:
- SSDI monthly payments
- Lump-sum (retroactive) payments of SSDI benefits

To determine if your benefits are taxable, you can request Form SSA-1099 from the Social Security Administration.

I have SSI and I Paid Social Security Taxes in 2008. Are Tax Credits Available?

Yes! You may be eligible for the Earned Income Tax Credit (EITC). EITC is a refundable tax credit.

Facts about EITC:
- It was enacted in 1975
- It was designed to help low income workers and families by offsetting the burden of Social Security taxes
- It was created to provide an incentive for low-income persons to work
- 1 in 4 people who are eligible failed to claim the EITC

If you or your spouse were employed for part of 2008, you may be eligible for the EITC.

You may be eligible for EITC for Tax Year 2008 if you meet the following requirements:
- You have a valid Social Security Number
- You earned income from employment or from self-employment
- Your earned income and adjusted gross income is less than $38,646 with two or more qualifying children, less than $33,995 with one qualifying child or less than $12,880 with no qualifying children

I Need Help with My Taxes. What Should I Do?

Filing for income taxes may seem like an overwhelming and complicated process. Fortunately, the government offers many free or low cost tax assistance options for persons with limited incomes. Below are 6 tax assistance options:

IRS Free File:
The IRS Free File is for taxpayers earning $56,000 or less in 2008. The IRS Free File allows you to file your federal tax returns for free under the Free File (LINK) program.

The Free File (LINK) program is offered in both English and Spanish and is available through the IRS website.

Volunteer Income Tax Assistance (VITA):
VITA offers free tax help to people earning $42,000 or less in 2008. Over 12,000 VITA centers are located throughout the United States. To find a location near you, call 1-800-829-1040 and ask for the nearest VITA center. VITA volunteers can help you prepare basic returns for low-income taxpayers.

Low Income Taxpayer Clinics (LITC):
LITC can assist you with tax appeals, collection disputes and drafting responses to IRS notices. LITC's are located in every state and operated by non-profit organizations. To find a location near you, check the IRS website.
AARP Tax-Aide Program:
The AARP program has 7,000 locations nationwide and their volunteers can help you file your taxes. The AARP helps persons with low-to-middle incomes and persons age 60 and older. To find a location near you, go to AARP's website.

State Tax Return Preparation Assistance:
You state revenue department may have a location where you can get help with filing state personal income tax returns. To get help, you must provide the assistant with a completed copy of your current federal income tax return, your W-2's, your 1099's and other documentation such as a social security card. To find a location near you, check your state revenue department's website.

Filing for taxes and determining if you need to pay taxes on your Social Security benefits may seem complex and complicated. Don't give up! Remember -- there are programs and services available to help you.