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Posted by Cathy on February 2, 2007, 2:10 am
Please log in for more thread options Helpful One wrote:
>> LCUPIT@COX.NET wrote:
>>> My husband was out of work for 2 1/2 years. He has been
>>> receiving LTD income from an insurance company through his
>>> employer. We have filed for SS Disability with complications
>>> as usual. However, in Feb 2006 they sent us a large check
>>> for back pay for a portion of the period he was off but it
>>> stopped at that. The check was for over 19,000. We had to
>>> turn around and write a check for this amount and give it to
>>> the insurance company as reimbursment. I am now receiving
>>> this SSA-1099. When I complete my Turbo Tax and input this
>>> form, it affects my refund tremendously. I have to pay tax
>>> on this but I actually only had the money for 1 day. All
>>> this did was run through us and tax us for it. But we did
>>> not get it.
>>>
>>> I've heard that disability income is not taxable. Is this
>>> true? Please advise. We need as much refund as possible.
>> Normally when the social security pays out disability
>> benefits that covers more than one tax year (which it
>> appears they did), you have an option of calculating
>> potential tax owed under two different methods. If you are
>> insistent on preparing your return yourself, I would suggest
>> visiting the IRS website (www.irs.gov) and downloading
>> publication 915 for details on your options. How Turbotax
>> handles this option, I am not sure and it may not be able to
>> handle it.
>>
>> Yes, generally, disability insurance is not taxable, but
>> benefits received from Social Security CAN BE taxable,
>> depending on AGI and filing status.
>>
>> This might be a good occasion to seek the advice of a paid
>> professional in your area, such as an Enrolled Agent or CPA.
>> I fully understand why the money went back to the company
>> that paid out the long-term disability benefits, but if you
>> could have refused the money from social security, I would
>> have (due to having to pay taxes on that money), but you may
>> not have had that option!
>>
>> Of course, most everyone wants as much refund as possible
>> hehe :)
> Definitely follow Cathy's advise with respect to either
> looking at publication 915 or seeing a paid professional.
> Since most, if not all, of this payment appears to apply to
> back pay in prior years, the amounts of that payment that
> needs to be include in 2006 may be none or minimal depending
> upon your other income during those preceding years.
> Worksheets 1, 2 and 4 in Publication 915 help you make the
> determination on how much needs to be included.
>
> Also, Publication 915 includes two other provisions that you
> don't want to overlook if they might apply.
>
> If you included any of your LTD diability income you
> received from the insurance company as income on your tax
> return in an earlier year, you can claim an itemized
> deduction for the part of the payments you included in gross
> income in the earlier year. If the amount you repay is more
> than $3,000, you may be able to claim a tax credit instead.
> Recognize that this provision only applies if you included
> the income on your return, and thus presumeabley did or
> would have paid taxes on it
I even learned something new here! Did not know all of this
about LTD benefits being taxed in a prior year and then
becoming an itemized deduction .....makes sense though!!! I
always say that I learn something new every day and this is
my lesson for today!
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