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Do I have to File Taxes on My Disability Payments?

The answers is, it depends. It depends on your marital status and household income. If you are a single person receiving disability benefits exclusively, you don’t necessarily have to file taxes. It is unlikely you have reached the threshold, which is $25,000. However, some years there are stimulus packages and other tax benefits available for people who file taxes so it might be in your best interest to file taxes. If you receive disability benefits and work part-time, you might have to file taxes. Generally, if your income is more than $25,000 you need to file and pay taxes. You won’t have to pay taxes on all of the disability payment you have received, but you will pay on a portion of what you have received.

If you are married and your spouse works and your combined income of disability payments and your spouse’s wages or salary exceed $32,000, you need to file and pay taxes. Once again, you will not be taxed on the entirety of your disability payments.

You can ask Social Security to withhold taxes from your disability payments. They don’t do this automatically, but you can make arrangements to have that done. This is a good idea if you think you will end up owing money.

If you receive a lump sum for back pay, you should not claim the full-amount on the tax return for a single year. That will likely put you in a higher tax bracket and increase your tax liability. Instead you should amend your taxes for the previous years and claim the specific amount of back pay you were paid for each year. If you receive disability, you will receive a 1099 from the Social Security Administration.

There is a Volunteer Income Tax Assistance (VITA) program that works in conjunction with the Internal Revenue Service (IRS). Volunteers help people who make $54,000 or less or people with disabilities figure out and file their taxes. These sites are generally available in community and neighborhood centers, libraries, and schools throughout the country. If you aren’t sure what to do, you should consult a tax professional and that can include a VITA site.

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