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Worker Taxed Thousands for Social Security Disability Benefits He Never Received

According to a recent news feature from Forbes, a United States Postal Service worker was injured on the job and claimed workers’ compensation benefits.  He was approved for those workers’ compensation benefits and started collecting benefits.

952313_gavelThe claimant, who chose to represent himself in the process, decided to apply for Supplemental Security Income (SSI) benefits to supplement his workers’ compensation benefits.  He fully disclosed his workers’ compensation benefits to the United States Social Security Administration (SSA), so there was nothing improper about applying for this benefits.  However, after applying, he was quickly denied for Social Security disability benefits.

As our Boston disability benefits attorneys can explain, this is not unusual, as the vast majority of applications are denied.  If fact, it doesn’t usually matter if the claimant is actually disabled, as they deny these applicants primarily as a way to save money by paying out less in benefits. While you can appeal this process, this worker did not have to do so, because SSA sent him another letter saying that he was eligible for benefits, despite collection of workers’ compensation benefits. However, SSA also told him that he would not be receiving any benefits, since the amount of benefits to which he was entitled would be offset by any workers’ compensation benefits.

Since he was earning more in workers’ compensation benefits than the maximum monthly benefit from disability benefits for his workplace injury, he was not to receive any benefits.  He did however, receive a 1099 in the mail saying that he was paid the monthly benefits; however, since they were offset, and he never received the money, he did not bother to claim that income on his taxes.

As it turns out, the IRS told him that he owed over $35,000 in taxes, because he was technically paid the money, although it was then offset, so he never actually got the money.  Had he not applied for Social Security disability benefits, he would not owe this tax money, but since he became eligible, he owes the taxes, despite the offset.  He then chose to represent himself in the lawsuit against the IRS, but his claim was quickly dismissed.

While this may seem like an absurd result, Congress chose to do this on purpose through bipartisan legislation in 1983, with the explicate purpose of saving the agency money by discouraging people from applying for benefits. As this author of the article recommends, this is a good reason for speaking with experienced disability benefits attorney in Boston before applying for any benefits, as situations like this do happen all the time, even though it seems extremely unfair.  The reality is that while it is unfair, many aspects of the system are designed in just such a way, and the unrepresented claimant is a particular disadvantage.

While you can call the SSA for advice before applying for benefits, it is best to have someone on your side who doesn’t also work for the same agency that is trying to deny your rightful claim for disability benefits.   Another thing to keep in mind is that if your attorney also regularly works with workers’ compensation clients, there is a better chance that he or she can help you steer clear of problems such as this one involving taxation for benefits not received.

If you or a loved one is seeking Social Security Disability Insurance in Boston, call for a free and confidential appointment at 1-888-367-2900.

Additional Resources:

How A Disabled Worker Got $0 Social Security, But Owed Taxes On $30,519 In Benefits, May 13, 2016, Forbes, By Janet Novack

More Blog Entries:

Allensworth v. Colvin: SSDI Hearings and Appeals, April 1, 2016, Boston SSDI Lawyer Blog