I received my back pay for SSD but I had to pay my Dis. Ins. Co. back. How are my Federal Taxes handled?
- ninasgrammaLv 71 decade agoFavorite Answer
You have to report the lump sum SSD payment as income. There are two ways to do this. You can declare all of it in 2007, or you can use the lump-sum election. This amounts to refiguring your tax for each year the lump-sum applies. A complete example is shown in IRS Pub 915.
Next, you can get either a deduction or a credit for the repayment. To take a deduction, you can deduct the amount of the repayment on Schedule A as a miscellaneous deduction subject to a 2% of AGI floor. To get a credit, you refigure your taxes for the previous years, with the repayments that apply to each year. A full example is worked out in IRS Pub 525.
The simplest way of course is to report all of the SSD in 2007 and take one deduction of all of the repayment on Schedule A. If this causes a large tax liability for you, then look into the other methods that recompute the tax that would have been owed, if you had received the benefits and paid back the disability payments each year.
- Anonymous1 decade ago
If the disability insurance was taxable (which it would be if you got it through work and the employer paid the taxes), how much money did you receive in 2007, how much have you repaid in 2007? The amount dictates the tax treatment.
This is called a repayment (IRS publication 525).