SSD backpayments

[Leo8771]

Do you pay taxes if you receive SSD backpayment that is paid back to your LTD insurance company when you paid quarterly taxes?

[AmyC]

Yes, but with a possible caveat for credit. You  will receive an SSA-1099 with the income to include in your taxes. If you were paying taxes on the disability, it must have been pre-tax or employer paid. If you are paying back $3,000 or more that has already been taxed, you can do a claim of right under IRS section 1341. To do this in TurboTax, follow the steps in What is a claim of right?  repayment?

[Leo8771]

Yes, it was LTD through MetLife paid by my employer when I became disabled. I did pay quarterly taxes on LTD for three years, then got approved for full disability and received a lump some backpayment check from the treasury in December 2025. It was deposited in my bank account, then all but $5,000 was withdrawn by MetLife the next day. I accounted for the $5,000 in January's quarterly taxes for last year.

[AmyC]

You have two things going for you. The SSD covers multiple years so you can use the lump-sum election to help prevent you from being pushed into a higher bracket. In addition, you can claim credit for the taxes paid on the money over the past 3 years. This will take some re-calculating of those taxes to claim the difference between what you paid vs what you would have without the income. It is well worth the time and energy. Once you accomplish those tasks, the $5,000 will be properly accounted for on your taxes.

We are glad to help with any questions you have along the way.

Follow the steps in these articles:

• What is a lump-sum Social Security payment?
• What is a claim of right?  repayment?