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    michmom's Avatar
    michmom Posts: 2, Reputation: 1
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    #1

    Dec 10, 2008, 07:30 PM
    Social Security Disability+taxes to custodial parent
    My daughters father was granted his SSD (not retirement or SSI but Disability) and stated that our daughter will receive a check for a monthly amount that is greater than his child support obligation (between $40 and $60 of a difference). He asks that I go to the Social Security office and fill out the paperwork because he is not the custodial parent so he was told he cannot file on her behalf. Supposedly the amount will be retro to 2.5 years ago when he first filed. He asks that I also go the Friend of the Court and ask for a reduction/adjustment/review because what SSD will pay is more than his child support. Okay, not thrilled with taking the time off work to do it, but OK. I don't expect him to pay child support in addition to the SSD payment, he will be receiving under $1000/mo and has to live. From my understanding, Michigan will not have him pay child support separetely from the SSD because the amount will be greater. He is under $500 I believe in child support back owed so not much to make a fuss about and not really a factor.

    The problem is that he asks that when our daughters retro SSD check comes in (in my name on behalf of our daughter is my understanding how it will be addressed), to cash it and give him the money because he has to pay back his previous employers long term disability he received before receiving the SSD. Now that he has SSD he will need that money to pay it back or will not be able to survive. Ok, whatever, not a big deal. I can live without the 10-12K and support my daughter.

    My question though is if I will be taxed on our daughters monthly and retro payments? My base pay is 65K a year. Do I claim the SSD or file taxes on behalf of my daughters SSD check(s)? Because this will make a big difference if that money is given to him or if it goes into my daughters college fund because I don't want to be penalized for receiving money I didn't actually receive and use. Thank you!
    N0help4u's Avatar
    N0help4u Posts: 19,823, Reputation: 2035
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    #2

    Dec 10, 2008, 07:49 PM

    The first paragraph is correct that is what you have to do.
    The part about him having to pay his previous employers sounds like shaky and he is trying to scam you. I never heard of it and it sounds illegal to me. I would just go apply at SS office and not discuss it with him any further. If he asks tell him that you will go by what the person at the SS office advises you to do and drop it.

    The taxes they always told me I didn't have to file the SSD but simply report it as I am receiving it but I was below poverty level anyway. So I am not sure about the tax thing for you.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,788, Reputation: 846
    Senior Tax Expert
     
    #3

    Dec 11, 2008, 10:33 AM
    Lump sum SSD payments ARE subject to income taxes, and several of my clients were dismayed when I did the calculations (which, BTW, must be done manually and are a REAL challenge) and told them what they owed.

    Since the SSD is in your daughter's name, she will owe the taxes. It should not be too much, but you will have to file a return for her. I strongly recommend you get professional help for that return.

    Now, as for paying back the employer's long-term disability, that IS plausible. Many such policies have a co-insurance provison for SSD; it depends on how the long-term disability policy is written.

    MichMom should contacft her husband's employer to find out the name of the company who underwrote the long-term disability policy, then give the insurer a call and ASK. While the employer may lie for her husband out of loyalty to an employee, the insurer has no reason to lie.
    michmom's Avatar
    michmom Posts: 2, Reputation: 1
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    #4

    Dec 11, 2008, 05:10 PM
    Thank you very much! I asked the SSD office today and they told me no about having to acknowledge the money from SSD but to call the IRS or a CPA to be sure. It did not matter what my income was at all on whether I'd have to claim it. So then I called the IRS and essentially what he told me was that if my daughter has an income of over $400 from various sources (CD's, IRA's, HSA, employment, etc... ), not including the SSD payments, then it WOULD have to be claimed and for her to file a tax return. Since she does have various accounts with an income I have to wait for all of the year end forms to check that. It doesn't effect my taxes per say other than I would be the one paying whatever taxes my daughter owed for the money. When my daughter gets a job in the next couple of years and makes over $400 a year, it sounds like she will possibly have to claim that. I use a CPA for taxes anyway so this is a good thing and one more thing for her to figure out! Doesn't make sense to make the SSD claim though and pay taxes on it when you don't have to for child support!

    Thank you for letting me know about the lump sum payment AtlantaTaxExpert, I did not think to ask that when I called. I'll save my tax person the headache right from the start, as much as possible anyway, and bring everything I receive on the SSD as well.

    I highly doubt I will ever have access to the long term disability account information but I did ask my HR at work and they said our policy is stated that after a certain amount of time that the employee has to file for SSD and if the claim is denied then they will continue to pay, but if the SSD takes effect then the long term disability technically stopped from the date the SSD came into effect. So the employee has to pay back the money that was received they were never supposed to get.

    Thank you!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,788, Reputation: 846
    Senior Tax Expert
     
    #5

    Dec 12, 2008, 08:29 AM
    Glad to help.

    If you have a CPA working for you, then, by all means, give her a call and ask about the lump sum SSD for your daughter. You are paying the CPA a fair chunk of change for her expertise; let her EARN it!

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