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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7119
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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If I was on short term and term disability the whole year.

Customer Question

If I was on short term and long term disability the whole year. Having serious finacial problems call my 401 plan and told them I needed money, was not making it. Only getting 50% of my income monthly, which would hardly cover my monthly bills much less medical out of pocket. The guy told me I should take a large loan out so I wouldn't need to borrow money for long time, put on 5 year loan and since money would not come out of pay check because on long term getting paid from insurance, then could not make payment and would count as income, but I understood at time 5 years from now. Then as time went on found out coming out this year even though I was listed as disabled in there system, when went from short term to long term in April, Kraft changed my status as active so could still be considered as a employee to receive long term disability. I had originally planned on retiring after short term up. Then decided since I needed knee repacement better delay retirement and go on long term disability. That's when Kraft switched my status to active instead of disabled. Had my knee replacement 11-'25-2015. Am still recovering. Have been out $4000.00 out of pocket and could not get into tub had to have handicapped into walk in tub, close to $10,000. Is there some way I can claim disability with my $25000 loan to help me with how much money going to owe on taxes not paid toward that $25000 loan that was changed into as regular income? Can you give me any way to not be hurt oweing all taxes on $25000 and I am 57 so under 59 and a half. Need help.
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

A couple of questions:

1. Was your original disability determination originally classified as permanent?

2. Were your disability payments taxable, ie. are you getting a W2, W2P, or 1099R?

3. Is the 25K loan that you can't repay is being shown as ordinary income in 2015, your only taxable income?

4. What is your filing status? Single, Married Filing Jointly?

5. Do you have any dependents? Children, etc.

Expert:  Stephen G. replied 1 year ago.

Just Checking In.......I see that you have seen my response;

Do you have any questions, or may I assist your further with your question?

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Thanks very much.

If you'd like to reach me again here at JustAnswer.com, just ask for "Steve G." at the beginning of your tax or financial question.

Customer: replied 1 year ago.
Ok
Expert:  Stephen G. replied 1 year ago.

I believe that you found the answer you were looking for in response to a similar question by a different expert.

My only concern with that answer, is that, while I sincerely ***** ***** your situation, the problem with that answer is that it presumes that you qualify as "totally & permanently disabled" when in fact, in your own words,

" I really am not permently (sic) disabled." So that said, if you were to follow that advice, and you were subject to audit examination two to three years from now, not only would you have to pay income tax on that $25,000., but you would be subject to all kinds of penalties and interest which could easily add another 50% of the tax to your tax bill. You can't just claim permanent disability without the medical diagnosis to back it up. I think you know that, so I don't want you to be misled otherwise. Please understand that "Long-Term Disability Status" for insurance purposes is not the same as "Permanent & Total Disability" for Social Security or income tax purposes. I only want you to have all the facts and circumstances so that you may make an informed decision.

Finally, since you are financially hard-pressed at the moment, you should know that should you owe taxes in excess of what you can reasonably afford to pay, working out a extended payment arrangement with the IRS is pretty much automatic these days; in fact, depending upon the amount, it can even be done online without direct person to person communication with the IRS.

Steve G.

Expert:  Stephen G. replied 1 year ago.

Just Checking In.......I see that you have seen my response; are you having any trouble with the rating system?

Do you have any questions, or may I assist your further with your question?

If not, please remember to rate my response as that is the only way we receive credit for our work.

Thanks very much.

If you'd like to reach me again here at JustAnswer.com, just ask for "Steve G." at the beginning of your tax or financial question.