As tax season approaches, you want to make sure you are prepared. Improper reporting could result in serious consequences.
To prepare, it is critical you understand the basic aspects of taxes you must report. In regards to Social Security Disability, there are a few important facts to know.
Payments to report
The Social Security Administration distributes an SSA-1099 to SSD recipients for tax reporting purposes. Those who receive this form should utilize it to report their benefits on their taxes. In the case that a party must report her or his SSD but does not receive the form, that person may retrieve a copy by contacting the SSA. Also, in preparation for making necessary payments, SSD recipients may consider setting up a withholding agreement, which would enact withholdings on their monthly payments. That way, they can have the necessary tax funds available for payment at tax time.
Exemptions
While Social Security income payments are completely exempt from taxes, some SSD payments are not taxable. The SSA details the requirements for people to report their Social Security Disability payments. In short, a party’s income and classification determine if she or he must report the SSD benefits. For those who identify as single, it is not necessary to report if their income is less than $25,000. For those who file as joint, they are exempt from filing as long as their income is less than $32,000.
Reporting back payments
Reporting back payments can be a bit confusing. Though payments may come at once, they are not all for that year. Therefore, recipients should only file the SSD payments for the current year as part of that tax year and fill amendments to the previous years for which they receive payments.
Though taxes can be complicated, having an understanding of them can be helpful. For further clarity, take some time to review the tax requirements in full, and consider consulting with a tax professional.