As April 15 looms, taxpayers are looking for ways to keep more of their money in their wallets and out of Uncle Sam’s. Allsup, a nationwide provider of Social Security disability representation and Medicare services, offers three critical steps to help your clients prepare for tax season.
Understand how SSDI and other benefits are taxed. According to Allsup, up to 50 percent of monthly SSDI benefits can be taxed. Taxes are owed on any amount above the base level of $32,000 for couples and $25,000 for individuals. Paul Gada, a tax attorney and personal financial planning director for the Allsup Disability Life Planning Center, notes that the average monthly benefit in 2009 was less than $1,100, well below the base level. He adds that disabled clients should still file a return to take advantage of available deductions, though.
It can take up to four years to receive benefits, according to Allsup, sometimes resulting in a lump-sum payment of benefits. Taxes on that payment can be spread over previous tax years without filing an amended return.