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Reporting 2011 Social Security Disability Income Tax

Author: Anthony Garcia

Published: 2012-02-27 : (Rev. 2013-06-17)


Information on lodging 2011 social security disability tax form including how to complete the necessary forms and properly file an appeal.

Main Digest

Common Mistakes with Reporting Social Security Disability Income in 2011 Taxes and How to Avoid Making Them.

Tax season is a puzzling time for most people, and confusion can often lead to simple mistakes. This can even happen to the best and brightest of people, a resource for graduate degrees online explains, whether they are students just starting out, full-fledged professionals or seniors. Yet what is more unfortunate still is that filing for taxes can be even more befuddling for the many American citizens living with a severe disability. According to Allsup, a nationwide provider of Social Security Disability Insurance (SSDI) representation and Medicare plan selection services, errors are common on taxes filed by these citizens - and are easily avoided if one knows how to complete the necessary forms and properly file an appeal.

In 2010, more than 1 million people became beneficiaries under the SSDI.

"It can take months or sometimes years to receive Social Security disability benefits," said Paul Gada, a tax attorney and personal financial planning director for the Allsup Disability Life Planning Center. "So, many people receive a one-time, lump-sum amount." Social Security benefits are taxable, and the received annual amount should be added to one's adjusted gross income (AGI). The average SSDI beneficiary receives roughly $12,800 every year and since taxes must be filed for any AGI that exceeds $19,000, many will not owe taxes. Gada added the problem occurs when the filer mistakenly reports the lump sum as 2011 income, and subsequently pays too much for taxes.

Since the lump sum includes back payments, many SSDI beneficiaries waste time and expenses by filing amended tax returns.

Gada said this step is unnecessary because the IRS distributes lump sum payments over previous tax years. Those who received a lump sum payment in 2011 will find this amount located on the SSA-1099 they receive from the Social Security Administration (SSA). There are also worksheets in IRS Publication 915 to help SSDI recipients determine the correct amounts, but Dada warns this process can be quite difficult and recommends consulting with a licensed tax professional.

Disabled citizens often commit errors with tax credits as well.

Earned Income Tax Credits (EITC) are available to citizens whose annual income did not exceed anywhere from $13,660 to $49,078 (depending on filing status and number of dependents). Since many SSDI beneficiaries do not file a tax return, they ostensibly miss out on thousands of dollars. In addition, a $7,500 tax credit is available to those who receive taxable income from a former employer's insurance or pension plan. To claim this credit in 2011, one's annual income must not exceed anywhere from $17,500 (single filers) to $25,000 (joint filers with two eligible spouses).

Dada said that people stand to lose a substantial amount of money by not claiming valid deductible expenses.

For one, blind or visually impaired individuals are often eligible for a higher tax deduction. Taxpayers should also monitor their AGI when they itemize; medical costs that exceed 7.5 percent of the AGI are completely deductible. These may include medical and dental procedures, travel for treatment, long-term care and medical premiums.

If a citizen is denied as a SSDI beneficiary, they may appeal, but this process can also be frustrating says David Bueltemann, Allsup manager of senior claimant services. A record number of Social Security appeal applications were submitted in 2011 - and many individuals committed errors during the process. He recommends claimants enlist in a third party representative to ensure the forms are handled correctly.

Buetlemann says a common mistake is lack of necessary information filled out on the forms - specifically, details about one's condition, work performance and medical regimen. He also claims that many argue against the denial, which ultimately amounts to wasted time. "File your disability appeal and use it as an opportunity to add details and explain your claim for Social Security disability benefits," Buetlemann said.

As the appeal process begins, he advises applicants to continue their regular medical routine - and consistently update the SSA of any critical developments. Lastly, Buetlemann encourages claimants to appeal if they feel they deserve SSDI, and not to give up on the appeal once the initial paperwork is filed. "People pay into SSDI with the understanding that if they have a disability that makes it impossible for them to work and they meet the other requirements. It's important to pursue this right," he said.

As April 15 draws near, many disabled Americans will file for SSDI.

In order to prevent mistakes, experts recommend applicants thoroughly read every document, keep solid records and consult a professional if there are any headaches along the way. If they successfully navigate the paperwork and meet the criteria, a huge financial burden is lifted from these dispossessed individuals.

Anthony Garcia recently completed his graduate education in English Literature. A New Mexico native, he currently resides and writes in Seattle, Washington. He writes primarily about education, travel, literature, and American culture.

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