The Internal Revenue Service (IRS) requires all citizens of the United States to file for their taxes each and every year. If you’re an employee, filing for taxes every tax season is not that complicated and is actually straightforward. Your employer merely deducts taxes from the weekly paychecks you receive and provides a W-2 every end of the year to show how much money you earned for the whole year and how much of that money was given to the government. The information indicated will then be used to file for your income tax season with the IRS. Tax season, however, can be quite a challenge for Disability Beneficiaries financially. So can disability beneficiaries file for taxes? The answer to that is, yes.
If you’re receiving some type of disability income, the IRS will always accept your tax return even if it reports zero taxable income. One, however, must not assume that all types of disability income are tax-free and that there is no need to report it on a tax return. On the other hand, other disability income is taxable but it does not always mean a tax return has to be filed.
If you’re thinking about filing a tax return, you first have to find out whether or not your disability income is taxable.
What types of disability income are taxable?
If you are currently receiving a disability pension from a private plan paid for by your former employer, the amount you’re receiving may be taxable. Another taxable disability income is the Social Security payments you receive for your disability. Some of these payments are usually taxable as well as any additional income you earned during the year.
What types of disability income are not taxable?
Those who receive supplemental security income or SSI payments for their disabilities do not have to worry about taxes. Other forms of disability income that are not taxable also include:
What’s the next step if some or all of your disability income is taxable?
The next step you’re going to take is to find out whether it’s necessary for you to file a tax return or not. You will only be required to file a tax return if your total income, not including tax-exempt disability benefits, is at least equal to the sum of one personal exemption and the standard deduction for your filing status. To put it simply, your disability benefits may subject to tax but if the amount is below the given threshold, there is no longer a need to file for a return or make tax payments for any of it.
But let’s say you do end up making tax payments on your disability income and you also receiving permanent and total disability as a retired individual, make sure you find whether or not you qualify to take the tax credit for the elderly and disabled to lessen your tax obligation. Do not ignore a tax credit because it can be extremely important if you want to lessen your tax burden on a dollar-for-dollar basis.
What’s the best status to take for married couples who under disability payments?
For your best interest, filing jointly with your spouse will be beneficial for you and your spouse. Married filing separately will only likely cause you to make tax payments on some portion of your Social Security Disability payments.
Another important information we need to mention is that the SSA is not required to withhold taxes from your Social Security Disability payments. However, if you’re in a situation where there is a possibility that you will owe taxes on your Social Security Disability benefits, it’s best if you contact the SSA and request them to have taxes withheld and that you would rather have your taxes be taken cared of through tax withholding. Doing this you will have to reach your local Social Security Office through the phone for tax withholding schedules.
If you don’t want to go through the hassle of tax preparation and in paying taxes for your disability payments, visit a trusted and proven tax professional who can explain the tax regulations better for you or hire them to file your tax return so you don’t have to worry about it every tax season.
