Received several years back pay from SSDI - why are all years counted as current year income for Obamacare?

[TaxGuyBill]

Unfortunately, that is the way that Congress wrote the law.  Sorry.

[SweetieJean]

You should be able to qualify for Medicare if the SSDI goes back at least 24 months,

[back]

yes, but while waiting for approval for SSDI I utilized Obamacare.  Now the retroactive one time lump sum is being treated as income exclusively for 2017 as I understand it.  If I understand that correctly, I will have a very sizable tax bill to face.

[TaxGuyBill]

Did you have any income from working during the year (such a W-2 job or Self Employment)?  If so, you may consider contributing to a retirement account (such as a Traditional IRA), which could reduce your repayment of the Premium Tax Credit.

After you enter ALL of your information, you may want to experiment with seeing how a retirement contribution would affect your taxes.  An IRA contribution would not need to made until April 15th-ish.

[markstoveken]

Please contact your congress person and Senator.  I've been working on this with issue with Congressman Joe Neguse in CO.  There is awareness of the problem by many in Congress.  They are trying to correct the problem but need to be pushed.  Particularly to make sure any new legislation includes provision to retroactively fix the problem for people who have already been penalized.  If you want more insight, feel free to email me at [email address removed]

[Dmvvv79]

• Hi Markstoveken.  
  
  

[Dmvvv79]

Hi @markstoveken , 
I am interested in information you may have about the Ssdi back pay and huge burden it puts on the receiver and how it distorts their income for the year received. 
wondering if you have any information. 
After Several years of financial ruin from failing health and forced to medically retire,  I applied for and after a year was approved and for two years back pay. By that time I had lived off of credit cards and family loans. Now I have to pay 1/2 of the back pay into taxes. I normally would’ve qualified for child tax credits and normally Would’ve received thousands back. Now I lose that and have to pay in 6g

Your email is blocked by the site so hopefully you see this here.

thanks in advance! 

thanks,

D

[WendyN2]

You can't amend returns for prior years to reflect social security benefits received in a single lump-sum in the current year. You must include the taxable part of a lump-sum payment of benefits received in the current year (reported to you on Form SSA-1099, Social Security Benefit Statement) in your current year's income, even if the payment includes benefits for an earlier year.

However, there are two ways to determine the amount of income to include:

• You can use your current year's income to figure the taxable part of the total benefits received in the current year; or
• You may make an election to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year.

You can select the lump-sum election method if it lowers the taxable portion of your benefits:

• Under this method, you refigure the taxable part of all your benefits (including the lump-sum payment) for the earlier year using that year’s income.
• Then you subtract any taxable benefits for that year that you previously reported.
• The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for the current year (figured without the lump-sum payment for the earlier year).
• Worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits can help you calculate the taxable portion using this method.

Here is the link for your reference:  IRS Publication 915