As anyone who has lived past puberty can tell you, life is unpredictable. As human beings we get sick from time to time and accidents happen. According to the Social Security Administration, someone is considered disabled ‘if they can’t work due to a severe medical condition that has lasted, or is expected to last, at least one year or result in death. The person’s medical condition must prevent them from doing work that they did in the past, and it must prevent them from adjusting to other work.’
Some recipients are surprised to learn that the disability benefits received should be included as income on their tax return. It’s not unusual for someone to do their taxes, not include the disability payments and later receive a notice of deficiency from the IRS.
Social Security Disability Insurance (SSDI) benefits are not to be confused with workers’ compensation. Workers’ compensation is generally tax-free provided that payments you receive are for job-related injuries or illness.
Some 9 million Americans receive SSDI so it’s important to remember that these benefits need to be included in your income come tax time.