Social security disability payments can be a great relief to one’s personal grievances and can therefore have considerable positive benefits for the recipient. There are numerous forms in which these payments can be disbursed, including recurring payments (every week or month), time-line payments (with an even more unique and organized schedule), and lump-sum payments. The strategies employed for optimizing the amount of money you keep can be explained to you by an attorney for social security disability. This article will focus on the last option; the lump-sum disability payment. Specifically, the social security lump-sum disability payment is a one-time disbursement for benefits that the recipient is entitled to for the prior year benefits. This brings up an important question. Do I need to pay taxes on this payment? If so, how much and how does it work?
Whether you pay taxes and the amount of taxes you will pay on this income will depend on numerous factors, including but not limited to, the number of previous deductions you’ve made on your income for the prior year. First of all, it is important to note that most people who receive monthly social security payments as their only source of income will not be obliged to pay taxes on those amounts. However, a recipient who reports a lump-sum payment as their annual income may have to owe taxes in some shape or form. Specifically, the rules from the Internal Revenue Service (IRS) state that a federal income tax return must be filed if the recipient’s gross income is over a certain amount. It is important to remember that each person’s individual tax owing amount will depend on their own unique circumstances. However, the general guideline is that if the recipient makes over $25,000 to $34,000 a year, the income tax owed can accumulate up to 50% of the total benefits. An attorney for social security disability can better help you understand these guidelines and help you receive the outcome you desire.
Some recipients conclude that it will be an advantage for them to claim all of their lump-sum payment for the previous year (described in the paragraph above), while other recipients decide to use the IRS worksheet in order to spread it over pervious tax years. The worksheets provided in a document titled ‘IRS Publication 915’ can be used to determine the taxable portion you owe to the government agency. Specifically, you will see the amount included in Box 3 of Form SSA – 1099 (which you will receive from the Social Security Administration).
Overall, there are two main strategies that disability recipients use to organize the payment of their tax returns for the previous year. One strategy involves simply paying up to 50% of their total benefits for a pervious year income of $25,000 to $34,000 (more than this income may result in up to 85% of the income being taxed!). The other strategy involves using the IRS Publication 915 worksheets, which are provided to the recipients by the Social Security Administration. In conclusion, it is very important to remember that these are complicated tax strategies, therefore in order to receive the best outcome, you should look for an appropriate attorney for social security disability.
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