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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Social Security
Satisfied Customers: 15272
Experience:  Licensed CPA, CMA, CFE, CGMA M.Accy Also Teach Accounting courses at Master's Level
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If I Was On Social Security Disability and I Recieved Money

Customer Question

If I Was On Social Security Disability and I Recieved Money From A Workmans Comp Case Would I Have To Pay Tax On This Money and would it Affect My Disability monthly amount
Submitted: 1 year ago.
Category: Social Security
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

I realize you have a question about social security. My goal is to help you better understand your options.

MyVirtualCPA :

How are you today?

MyVirtualCPA :

The worker's compensation claim is not taxable

MyVirtualCPA :

The receipt could impact your social security disability.

Customer:

will it affect my monthly disabilty check and will there be any state capital gain taxes

MyVirtualCPA :

There would not be any state tax either

MyVirtualCPA :

but it could impact your disability.

Customer:

what should i do to avoid any tax

MyVirtualCPA :

Your worker's compensation and your disability payment together cannot be more than 80% of what you earned before your disability began

MyVirtualCPA :

There is no tax on your worker's comp benefit at all

Customer:

this was in a work comp accident case that caused the disability

MyVirtualCPA :

Yes...did I answer your questions about your disability and worker's comp?

Customer:

no , does that mean the amount that i would have made in the 11 years this has been going on are does it mean using my monthly income that i made when i was working

MyVirtualCPA :

This means the monthly income you received when you were working. So, if you earned $1,000 while you were working you could only make $800 between social security and worker's compensation

Customer:

this was a settlement that included lifetime medical on the injury plus a cash settlement less lawyer fees,im trying to find out if i would mess up if i took the cash settlement because i would have to pay a tax on the money

MyVirtualCPA :

No, there is no tax on worker's compensation awards

Customer:

but your saying it might give me a problem with my disabilty program if i took the money and didnt re invest it somewhere

MyVirtualCPA :

No, when you get a monthly amount, the amount plus your social security cannot be more than 80% than what you made when you were working

Customer:

Im sorry Im Still not Understanding heres an example. i have been recieving 1000.00 per month on my social security disability check per month for the last 6 years and now they finally decided to settle after 11 years and they agreed on 250,000 lump sum less my 78,000 lawyer fees which would make it a 172,000 lump sum would that money affect my monthly disabilty im already getting and would i have any state or federal tax on this money

MyVirtualCPA :

You would have no federal or state income taxes on that amount. However, social security will apply a formula to the lump sum to calculate an equivalent monthly benefit, and they will adjust your social security so that your benefit each month was not more than 80% of what you earned prior to becoming disabled

Customer:

where can i get this formula because im only 53 and i should live till at least 75 i hope

MyVirtualCPA :

It's not published. All the social security formulas are really complex

MyVirtualCPA :

You could visit your local office and tell them about your proposed settlement, and they could advise you exactly how it will impact your benefits

Customer:

can i print the question then im done

MyVirtualCPA :

Yes, you can print this conversation using the print function on your browser

MyVirtualCPA :

Then, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

i will thanks

MyVirtualCPA :

You're welcome

MyVirtualCPA :

Have a great night

MyVirtualCPA :

Please don't forget to rate as "excellent"

Megan C, Certified Public Accountant (CPA)
Category: Social Security
Satisfied Customers: 15272
Experience: Licensed CPA, CMA, CFE, CGMA M.Accy Also Teach Accounting courses at Master's Level
Megan C and other Social Security Specialists are ready to help you

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