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  1. #11
    Join Date
    May 2007
    Posts
    408

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    SusieRI,

    Are you saying that your annual income from SSDI is $2300 a year? DAMN thats not much. He must of not paid any SS in.
    IF thats the case then approx. half of this would be subject to Federal tax if you file jointly and your total income is over $32,000 a year.

    Workers Compensation benefits are not tax deductible as is period.

    What box # is this Workers Comp Income in on your SSA-1099?

    I have never had a issue with WC pay on my SSA-1099.
    I do pay Federal Tax on approx half of my SSDI because our household joint income exceeds $32k.
    If your household income is above $32k, you would be taxed on approx. half of the $2300 a year SSDI income,
    I would like to help but I see your problem as either a big mistake or a big misunderstanding on your part.

  2. #12
    Join Date
    Apr 2009
    Posts
    11

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    That's exactly what I'm saying ... it was about $140 per month, then went up to $190 for 2009 (since he collects MA WC, a new COLA is instituted every 10/1, which further muddies the peabrains at the SSA)!

    As for which box on the SSA-1099 contains that $9K+ amount, I'll have to check.

    Thanks for all your help. I'll look this stuff up and will advise, probably tomorrow.

  3. #13
    Join Date
    May 2007
    Location
    Calif
    Posts
    483

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    Quote Quoting SusieRI View Post
    This is all the hubby's stuff (approximated), NOT mine:

    WC annual benefits total $18,000, SSI is $2,300 ... which is way below $32,000. So what I am trying to figure out is how the SSA-1099 can show as taxable income (or whatever term they put on it) an amount of over $9,000? Do they just automatically take 50% of the WC benefits and screw us?
    Susie: Actually the SSA 1099 probably has the following: Paid by check/direct depost $2300.00, the Medicare Premium Part B $1060.40, WC Offset $18000.00. So the total benefits received was the $2300.00 + $18,000.00 for a total of $20,300. This sum is then reduced by 1/2 so the amount subject to possible taxation is actually $10,150.00. This sum is then subject to tax at about 10%, ours was slightly under 10% by about $2.00 whole dollars.

    where the tax comes into play is your wages are placed on line 7 of the 1040, then only the tax liability of the 10% is added on line 20b, thus the combined income is then your salary/wages and his tax liability sum of roughly $198.00.

    From there it is carried down to the adjusted GROSS INCOME, and then all your deductions are taken ie credits etc.

    The only reason we owed this 10% of his total Benefits was because my income went up which placed us in a different tax bracket....

    I know it sucks, but Uncle Sam will always have his hand out when he can.

    Hopefully this helps you somewhat, I just worry about the bottom line.....if I don't owe, I'm grateful......I like that forced savings....

    RW.....
    Last edited by roofinfool; 04-15-2009 at 03:42 PM.

  4. #14
    Join Date
    Apr 2009
    Posts
    11

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    I've got the SSA-1099 form here now.

    Box 3. Benefits Paid in 2008 shows $10,708.80

    Box 4. Benefits Repaid to SSA in 2008 shows NONE

    Box 5. Net Benefits for 2008 (Box 3 minus Box 4) shows $10,708.80

    Description of Amount in Box 3 shows
    • Paid by check or direct deposit ... $1,704.00
      Workers' compensation offset ... $9,004.80
      Total Additions ... $10,708.80
      Benefits for 2008 ... $10,708.80

    The really strange part is the worksheet on the back (which I was checking out last evening)! There's a note at the top right that says, "If you plan to file a joint income tax return, include your spouse's amounts, if any, on Lines A, C, and D below." What gets me is that line C is "... total income that is taxable, such as ... wages ....."

    How the he$$ can my income have any effect on the status of HIS taxable income? If this has been going on for a very long time and no one has caught on and fought it, isn't it time someone did? I mean, REALLY, should I just grin and bear it (or, as my brothers would say, bend over and smile)????

    I'm going to check the IRS website now.

    I await your replies.

    Thanks, again.

  5. #15
    Join Date
    Apr 2009
    Location
    S. Carolina
    Posts
    5

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    I also have this problem w/ SSDI. My 1099 for this year states 76k! I have just received my starting payments in Jan of 2008 but did get back benefits starting from 2003. My check for back benefits totaled under 3k. (yes, for 5 years!) My actual income monthly is $60 + medicare from SS. My WC pays $546 a week (2180 a month)and I have never had any lump sum from them, my case is still ongoing.

    So, to make a long story short I actually recieve less than I am going to have to pay out in taxes this year due to this screwed up system. I have had CS reps for SS tell me it is not figured correctly but they can't fix it. the analyst dept has too correct it and the A dept will get back to me but to give it atleast 30 days. Well, it has been over 8 months since my original call about monthly pay and 5 months about the Virtual taxes. No answer and i get the same "we'll resubmit it" from CS when I call back!

    It seems as if I am paying for 2007 twice also. Last Feb'08 i received 1099 that said 2007 Income was 12k from SS. I didn't even get deposits until 2008! Then this year, under box 3, 2007 is listed again as WC offset @13K. Is it 12k or 13k !? and why am I having to pay for the same year twice?! It makes no sense.

    WC is not suppose to be taxable in SC because "taxes" are taken out before you're paid. you get 66% of what you would have been making at work. As I understand it, the 34% missing is for taxes etc. I understand SS wanting to offset your SS payments by the amount you bring in from WC to be sure people are not paid more than they originally made at their jobs. I DON"T understand how we are getting taxed on money never received. It is Virtual Income.

    This kind of taxation is the same as saying you applied for two jobs, X & Y. X pays 10k yearly and Y pays 90k yearly. You get hired for the 10k job but at tax time the IRS says you must pay on 90k because that 90K is what you would have received if you had been hired for job Y. It just doesn't make sense and I don't think Americans would stand for a situation like above but they expect us to just swallow this SS/IRS BS whole and not blink.

    Another thing that is bothering me is no one seems to want or be able to give me the formula used to compute the "offset" amount. I guess they do not wish for anyone to double check their figures. Do any of you guys have the actual formula?

    the bad part of all this is the people who are getting hurt in this situation are some of the people who need income the most. think about it. WC is usually finished in a year or two unless you have a sever case w/ lots of docs, surgeries, etc and permenate life functioning injuries. then WC can take years and years. SS is generally not approved in your first application and therefore takes at least two years to get. WC should be finished in 2-3 years and then SS will kick in afterward- no WC offset applied. Yet if you have a major disability and WC pays for years or for life then SS deducts WC. Aren't these people really the ones who will never work again or even have the ability to work again--EVER? Seems like this loop hole is designed to strangle people who have major injuries. And here I thought SS was suppose to HELP me!!

    In my situation, I am going to pay out in taxes more than I receive from SS- 1000's more. If I had known I was going to have to pay the goverment this much I would have never applied to begin with. I would have been better off never getting anything from SS and just relying on WC. You know things have gotten bad when someone says it is better to just rely on WC only!

  6. #16
    Join Date
    Apr 2009
    Posts
    11

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    I agree w/the "never would have applied" part. I specifically asked both the WC atty (who handled the initial part of the application process) AND the SSA atty, both of whom advised (as have many others) that "a portion of the SSA benefits may be taxable." That is a far cry from the offset amounts being taxable income!

    I plan on drafting a letter to my local federal senator and congressman about this horrible situation, and suggest you do the same. I am just absolutely dumbfounded that this is normal SOP and no one has raised a fuss about it! Of course, when I stop and think about the fact that many folks who collect SSA (with or without WC) also work on the side or under the table, then I can understand why no one says anything.

    Makes me wonder how much of his SSA benefits would be taxable if there wasn't an offset involved. My understanding is that if he were able to work part-time there is a cap on the amount of annual earnings before it counts as an offset to the SSA benefits.

    Furthermore, don't worry about getting any answers from folks at the SSA. They're so overworked that they can't keep track of what they're doing (and that only applies to the ones who actually work and/or have enough intelligence to handle the job to begin with!), nor would you ever be able to get someone on the phone that would have half a clue as to the problem.

    Good luck ... will keep you apprised of what I find out, and ask that you reciprocate.

  7. #17
    Join Date
    Feb 2007
    Location
    Calif
    Posts
    18,021

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    There's a note at the top right that says, "If you plan to file a joint income tax return, include your spouse's amounts, if any, on Lines A, C, and D below." What gets me is that line C is "... total income that is taxable, such as ... wages ....."

    How the he$$ can my income have any effect on the status of HIS taxable income?
    Just as it says...you are filing a ''joint'' tax return. If you had been filing married/seperately, each income would be calculated 'seperately'.
    Filing jointly takes into consideration all W-2's, all 1099's, as well as any other income eg. interest, dividends etc that the two of you claim as 'earnings'.
    Joint tax filings have always been this way... no doubt will continue as long as we function, or mal function, under the current tax laws.

    Another thing that is bothering me is no one seems to want or be able to give me the formula used to compute the "offset" amount. I guess they do not wish for anyone to double check their figures. Do any of you guys have the actual formula?
    Under SSA's 80% rule, you can have income from all sources that will total no more than 80% of your pre injury/disability average wages. Usually that figure is the amount of your wage at the time of injury, because traditionally that is your highest earning period. There may be other ways to calculate the average wages, but for now take it that way.

    SSA will determine you max benefits based on your 40 highest earning quarters...10 years of highest qualifying earnings. That benefit will be converted to a 'disability benefits' dollar amount...kinda like taking ''early retirment' ...like those people who retire at age 62 yrs, vs 'normal retirment age' 65 yrs.
    So, if your SSA is 2500/mo, and your SSDI is $2000/mo
    Take your average pre injury wage of $4000/mo X 80% your max monthly income is $3200/mo.
    You receive TTD of $2180/mo plus SSDI @ $2000 = $4180...$<$980> too much...SSA/SSDI will take the offset of $980 ... your monthly award will be $1020/mo. Until/unless your 'income' changes...OR you reach 'normal retirement age'...(and there are other considerations at that time.) If the $2000/SSDI is max, and Medicare Part B is being deducted...take the $96.04 off that 2K too.
    This same information is available here...http://www.socialsecurity.gov/pubs/10018.html

    WC is not suppose to be taxable in SC because "taxes" are taken out before you're paid. you get 66% of what you would have been making at work. As I understand it, the 34% missing is for taxes etc. I understand SS wanting to offset your SS payments by the amount you bring in from WC to be sure people are not paid more than they originally made at their jobs. I DON"T understand how we are getting taxed on money never received. It is Virtual Income.
    Yours is confusing Gmedic, don't know if it is actually 'confused' or just the way you are presenting here... but, you get 66% of what you would have been making at work. As I understand it, the 34% missing is for taxes etc... No... your TTD is 66.66% of your average weekly wage at the time of your injury... there are NO monies for any taxes here. The WC benefits are totally tax free. You aren't being taxed on any money not received, there is no 'virtual income' here.

    The SSA/SSDI benefits can be subject to taxes...but only if you take into consideration all other income you may have, and are above the threashold... as I recall, it's about 25K for single people....and then only a portion of the SSA/SSDI benefits are subject to tax. SSA retirement benefits are also calculated in the same manner.

    Seems like this loop hole is designed to strangle people who have major injuries. And here I thought SS was suppose to HELP me!!
    SSA/SSDI/SSI benefits are not dependant upon your WC claim...one has nothing to do with the other..
    SSA has a much higher threashold vs comp for determining if you are 'disabled' under their rules. You can reach MMI to your work injury, and be released to RTW with maybe only a 25% Permenant Disability under WC rules... but still be 100% 'disabled' under SSA rules.

    SSA does not pay 'temporary disability benefits' like comp... only permenant disability, your condition must be expected to last a minimum of 12 months...or end in death. Quite a bit difference is qualifying vs comp.

    There are 5 steps to determining if you are disabled under SSA rules...http://www.ssa.gov/disability/step4and5.htm#Q5_1, WC only takes one doctor to declare you TTD...Temporary Total Disability.

    that "a portion of the SSA benefits may be taxable." That is a far cry from the offset amounts being taxable income!
    The offsets are NOT taxable...only a portion of the benefits you receive can be partially taxable, just as was explained to you.
    When you finish computing the form, and read through the information at the SSA, and/or IRS web sites... and talk to your CPA... you'll begin to get a clearer understanding of how this works.
    Last edited by BvIA; 04-22-2009 at 10:31 AM.

  8. #18
    Join Date
    Apr 2009
    Location
    S. Carolina
    Posts
    5

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    Ok, I will have to look at how to Multi quote on here but first wanted to reply Back to BvIA

    thanks for the WC info on the 66%- as I said that is the way it was presented to me. (66% of normal salary and 34% withheld for other fees.) But I do want to point out something even you said....

    "there is no monies for Taxes here." and "SSA/SSDI/SSI benefits are not dependant upon your WC claim...one has nothing to do with the other."

    I believe this is mine and SusieRI's point EXACTLY! If one has nothing to do with the other, then SS should not even be having an offset for WC!

    And regaurdless of how you look at it, it still boils down to SS' "Income" figure being higher than what I receive every month from them. Since I am getting taxed on that higher amount which computed with my WC rate(even if it is just a % of the higher amount) not only is SS making WC taxable but it is making me pay taxes on monies not received from them.

    Simply put, SS' 1099 is listed under my IRS1040 as Gross income but according to US code: title 26,104 of the internal revenue codes specificly states: Any amounts received through accident or health insurance is not to be included in gross income. SSDI is SS disability INSURANCE. It also states: amounts received under workmen’s compensation acts as compensation for personal injuries or sickness is to be exempted from gross income. If SS is allowed to use WC as an offset and due to using that offset their 1099 adjusts my over all gross income on my IRS 1040, then the amount I am receiving for WC most is certainately becoming gross income. (which is not illegal [x2] in the first place) Since it is gross income that the IRS uses as the basis to start federal taxation then WC IS getting taxed but only if you have SS at the same time. A rose by any other name is still the same!

    Truthfully I'd be fine with the offset being included on the 1099 as long as my 1040 includes an area where such offset is also claculated into my deductions for total income too. In this way, SS could use the offset as a guide for making sure people w/WC don't get over paid but those same people are not having to include a SS offset into their total income amount which we are taxed from. One would balance out the other. Of course that scenerio would make sense and when the Gov't is involved you know we can't have that!

    As for workers comp and social security differing on amounts of doctors needed and temp vs permenate disability, I would not know. My case is a lifetime award benefits for comp due to hemi-paraplegia with spinal cord involvement and a progressive disease disorder directly related to it. I do know my SS was 100 times easier to get than WC but both required me to see more doctors than should be lawful in a lifetime, esp. since there are only two specialists for my disease in the US!

    SusieRI- I will deffinately keep you updated as to when I am going to "Go all postal" on the SS and IRS reps!-LOL! And I have all ready written the Newspaper here and my Congressmen. Please Keep those suggestions coming though. I have even wondered what it would take to start a Class Action to change all this @ SS and/or the IRS. Have any idea?

  9. #19
    Join Date
    Apr 2009
    Posts
    11

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    Oh, Gmedic, if you were nearby I'd give you a kiss for that last statement!

    Not sure of the regs, but I would be amazed if any action, much less a class action, could be filed against the Social Security Administration! Having worked in the legal field for close to 30 years, I'll see what I can find in this regard. Maybe I'll find a semi-retired attorney (or just a good one who is also a friend) to research this for us.

    Just so you know, I talked to someone at the IRS yesterday. While he seemed rather knowledgeable (much moreso than I expected, to be honest), he said that the problem lies with the SSA and that I need to contact someone there. Unfortunately for me, the folks at our local SSA ofc aren't that bright (I am fiduciary for my disabled brother, and have had to deal with them extensively in the past, so I'm quite aware of their ability levels).

    I think what I will do is contact someone at the local SSA office that I have dealt with in the past that I know has a good amount of gray matter and see what I can figure out. What surprised me about the IRS guy was that he seemed to think it was unlikely that the SSA had made an error on the 1099 (even though he sort of conceded that WC benefits are never taxable). I mean, c'mon now, those figures are input by some poor data entry clerk and, since that is a human performing that task, I have no problem thinking that it would be quite easy for an error to be made (and it is a good argument, vs. the "computer glitch" argument, as most folks think computers never make mistakes).

    The IRS guy also mentioned SSA paying back the insurance company, which in Massachusetts is NOT done (well, as far as I recall, I'll recheck the regs online in a second). I can't imagine what moron would have enacted a law that requires SSA to "reimburse" an ins company who, for all intents and purposes, is the party responsible for the permanent disability in the first place (financially responsible, at least).

    This whole thing continues to get stranger and more Twilight Zone-ish as time goes on. Please keep me in the loop and I will let all of you know what I discover as far as the screwed up 1099 reporting and a possible lawsuit. What a great idea (and it's right up my alley)!

    Happy Spring!

  10. #20
    Join Date
    May 2007
    Location
    Calif
    Posts
    483

    Default Re: SSA's Changing Non-Taxable Offset Income (WC) into Taxable Income

    Gmedic: I found the actual code and am providing it here as you referenced;


    TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 104
    Prev | Next

    § 104. Compensation for injuries or sickness



    (a) In general
    Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include—

    (1) amounts received under workmen’s compensation acts as compensation for personal injuries or sickness;

    (2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;

    (3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts

    (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or

    (B) are paid by the employer);
    I'm now wondering if (3)(A) is where the problem lays......most who receive SSDI are NOT retirement age due to their WC injuries, even though SSA determines the amount of SSA disability based on earned income and sufficient credits..

    I'm curious if an employer is required to pay in a % on the earned gross income of an employee to SSA as a form of premium in the event of early SSA benefits. Should this be the case then that % paid in is NOT taxable to the employee until such time as the benefit is actually paid, ie social security disability.

    If you look at your SSA annual statement if breaks down your potential SSA benefit for retirement at age 62, 66.6 etc and also provides a sum for Disability Benefits......the disability amount available is higher than the amount one would normally get if they reached retirement age......

    RW.....

    and then there is this from the IRS:

    http://www.irs.gov/publications/p915/index.html

    go to the section "are any of your benefits taxable"


    RW...

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