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    elmos4me3's Avatar
    elmos4me3 Posts: 1, Reputation: 1
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    #1

    Nov 8, 2007, 04:52 PM
    Disability multiple back year payment and taxation
    I received a lump sum back payment for disability and I am wondering if it's taxable and if so why doesn't the government take the taxes before they distribute it? I honestly can't think of another situation where they fail to immediately take their share .
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Nov 9, 2007, 01:10 PM
    If the disability is from a private company to whom YOU paid disability insurance premiums, then the lump sum is TOTALLY TAX FREE, which is why no income taxes were withheld.

    If the lump sum is from Social Security Disability, part of it is tax-exempt, but part is probably taxable. It depends on your specific situation and the amount of the payment and requires a somewhat complex tax calculation.
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