After waiting 3 years, I finally was classified as disabled by the government. I received the retroactive 3 year benefits in one lump sum. Since 9/07, I have received regular monthly disability benefits.

Are these benefits taxable?

Thanks, I'm confused.

No. SSDI is not taxable. Consider it just back pay owed to you after winning the lottery. (Just kidding, of course). And you don't have to file taxes if this is your only income.

Congratulations to you for sticking with the peruit of your claim. I know it wasn't easy. I watched my parents deal with that system for years as I was growing up! I would be very careful as far as if there is other income to report that might indicate earnings on your part. There are sometimes amounts that a person can earn and still draw benefits, and other times, at least as far as I am aware, no earnings are allowed. If you have any income from any source such as investments you'll need to file taxes for that stuff.

You'll want to know the specifics for yourself, as far as if any income might have an effect on your monthly benefit.

True, Ohioguy. The government hopes you get discouraged and go away or die before they finally approve your claim. I've seen people die only one week before they got approved after waiting for 4 years.

Sorry, guys! A large lump sum SSDI payment IS taxable.

SSDI is normally NOT taxable because the amount received falls below a set minimum. The lump sum is above that amount.

The tax can be mitigated, but some tax WILL be due.

Thanks AtlantaTaxExpert

I also found that it might be possible to file amended returns and spread the money out over a number of years. You need the award letter telling how much was received for each year... and a good tax preparer unless you have lots of time and knowledge!

Depending on number of exemtions claimed and other factors, it can have different outcomes as far as total taxes due. Legal fees involved in obtaining the settlement might also play a part in determining tax liability... another good reason for seeking an experienced tax person. My parents had six dependents and it was many years ago when they went through the similar situation.

Up to 85% of your SSDI income may be taxable if 1/2 of SSDI income plus other income exceeds the base amount (around $25,000 for Single).

What is your information source about amending returns to spread the money?

In my experience, you mus claim rewarded amounts in the year you get the money. It CANNOT be spread out.

Below are three websites that indicate the ability to spread out the income over a number of years. The third one mentions IRS publication 915... again I am not a tax expert and have suggested the OP seeks such advice for their specific case. If you look at the last link, it is IRS publication 915... go to page 11 for the information I am writing about.

It does appear that it is not considered filing an amended return. I was in error to refer to it as such.

Know which income is taxable and which is not - The Body

SSDI Lump Sum - Tax related issues for Veterans - Social, Government, and VA Policy - Veterans Benefits Network - Message Board - Yuku

Tax Treatment of SSDI Benefits and Lump Sum Payments

http://www.irs.gov/pub/irs-pdf/p915.pdf

One Guy:

If you have the time, I suggest you actually do the calculation as required under the Lump-Sum Benefit. I have had the "privilege" of performing this calculation four times.

You will find that most of the SSDI IS TAXED in the year you get it.

BTW, there is NO software support for this calculation. It has to be done manually.

Have fun!

Doesn't look like something I'd want to try! For this person's specific case It would require their tax statements for the previous years... I could easily see it turning into a long tedious process! You guys earn your money for sure!

Pity! It would be a learning experience for you.