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I applied for disabilkity in 2012. I finally won my case in…

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I applied for disabilkity...

I applied for disabilkity in 2012. I finally won my case in January 2018. I will start receiving $1507 a month starting April 3rd. My onset date was determined to be October 2010.Im not sure of my back pay amount because I haven't received my official letter yet, but do the math. Its significant. My question is, will I be taxed on this large amount, or will IRS consider this as payment for the 6 years it took them to handle my case?

Accountant's Assistant: These retirement benefits are supposed to help us but they can be so complicated! The Retirement Expert will help you get the most benefits properly. Is there anything else the Retirement Accountant should be aware of?

Im also going to enroll my 17yr old son to get benefits under my SSDI.

Submitted: 3 months ago.Category: Social Security
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3/24/2018
Social Security Expert: lev-tax, Tax Advisor replied 3 months ago
lev-tax
lev-tax, Tax Advisor
Category: Social Security
Satisfied Customers: 33,115
Experience: Taxes, Immigration, Labor Relations
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My question is, will I be taxed on this large amount, or will IRS consider this as payment for the 6 years it took them to handle my case?

As you might know - social security benefits (including disability benefits) may be partially taxable depending on other income.

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2017 in your 2017 income, even if the payment includes benefits for an earlier year.

The issue here that you may use two different method to calculate taxable portion.

.

Generally, you use your 2017 income to figure the taxable part of the total benefits received in 2017. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits.
Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year's income.
Then you subtract any taxable benefits for that year that you previously reported. The remainder is the taxable part of the lump-sum payment.

You will find worksheets and examples in IRS publication 915 -

see page 12

https://www.irs.gov/pub/irs-pdf/p915.pdf

Let me know if you need any help.

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