My husband was receiving LTD benefits through his employer for 3 years and just was awarded SSDI and just received a lump sum payment on December 31st for those 3 years. I understand that the LTD will be requesting an "overpayment", which is fine and I understand. However, my question is this... I just realized that the lump sum payment from SSDI was not taxed. It was a total of 42,658.00, which was after the 6000.00 paid to the attorney. The LTD carrier is asking for the total, 42,658.00. What about the taxes that need to be paid on that money? Let's just say that based on that 42,658.00, when we go to file our Federal Income taxes for 2011, We find that we owe the IRS 6000.00 in taxes. Am I legally able to deduct that 6000.00 owed for taxes out of the 42,658.00 and only reimburse the LTD THAT balance of 36,658.00?

You need to contact the long-term disability company to work this out with them. The issues of taxes and reimbursement for the legal fees are all matters to be discussed. If they are not cooperative, then use the lawyer who represented you before the Social Security Administartion to help with the negotiations.