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If you’re disabled and owe back taxes — meaning you have overdue tax bills — it could affect how much you get through Social Security disability benefits. You can still qualify for benefits but there are few things to know ahead of time. For example, the IRS could take some of your checks to help pay your bills.
In this article we’ll explain how to get disability if you owe back taxes; how much of your disability benefits the IRS can take to fulfill that tax debt; and the best way to get a lawyer to help your case.
Yes, you can get Social Security disability benefits if you owe back taxes, as long as you meet the medical and technical SSDI requirements or SSI requirements.
However, there are a few important things to know if you’re applying for disability and you owe back taxes:
It’s important to note that you can’t qualify for SSDI unless you’ve paid Social Security taxes for years, including at least five of the past 10 years. This is because your tax payments into the Social Security program help Social Security disability benefits.
So if your back taxes include unpaid Social Security taxes, you may not have paid enough to be eligible for SSDI. And if you haven’t paid any or enough tax you won’t qualify regardless of how much you earn or how serious your medical condition is.
The minimum amount that you need to earn and pay tax on is based on what the SSA calls work credits. You can learn more about work credit requirements here.
A garnishment or levy is when the IRS withholds part of your paycheck — before you receive it — to pay off a debt you owe.
If you have overdue federal taxes and don’t pay after multiple warning letters, the IRS can garnish your pay, including SSDI, to cover what it’s due. The IRS can garnish both your back pay benefits and your ongoing monthly payments, but it can’t garnish SSI benefits.
Keep in mind that garnishment is a final option by the IRS. It will send you more than one letter before taking any action. If you can’t pay your whole tax bill, the IRS also offers payment plans.
But if you don’t pay or set up a payment plan, your final warning will be a letter titled Final Notice of Intent to Levy and a second letter called Notice of Your Right to a Hearing. You can call the number in the letter to request a hearing at this point and if you don’t, the IRS will begin garnishing your wages 30 days after sending you those letters.
Read more about when the IRS can garnish SSDI.
Through the Federal Payment Levy Program, the IRS can garnish up to 15% of your SSDI payments.
As an example, if you receive $1,700 per month from SSDI and you have unpaid taxes, the IRS can take a maximum of $255 out of each check until your debt is paid. That would leave you with an SSDI payment of $1,445 each month to live on.
It’s going to be more difficult to get a lawyer to help with your SSDI case if you’re disabled and owe back taxes. A lawyer isn’t mandatory when you apply, but they can really help you win the benefits you need. For example, applicants who are denied and appeal to a disability hearing are three times more likely to win if they have a lawyer.
Your lawyer will only get paid if they win your case, and their fee is a portion of the money you receive in your first check. Since you’ll receive less money in that first check if the IRS garnishes your pay, the lawyer won’t get paid as much. Even if you don’t owe a lot in back taxes, most lawyers will be more hesitant likely to take your case.
If you are disabled and owe back taxes, you can still get help from a lawyer. Make sure to tell any lawyer upfront if you owe back taxes because if they find out after they’ve already agree to represent you, it’s possible they will drop you as a client.
Atticus can help you find a qualified disability attorney by matching you with someone from our network. To get started, fill out our 2-minute SSDI benefits quiz. If it looks like you qualify, someone from our team will reach out to learn more about your situation. Getting matched if free, you don’t need to work with our lawyers if you don’t want to, and you’ll never pay anything until after you win benefits.
If you have a federal tax bill that’s past due, the IRS will notify you by mail through the United States Postal Service (USPS). The IRS will send you several letters trying to collect what you owe before ever garnishing your wages. The IRS does offer payment plans if you can’t pay your whole bill at once.
Even if the IRS plans to garnish or levy your payments, it will send multiple letters warning you at least 30 days before it actually takes action.
If you don’t pay taxes, you can’t qualify for SSDI. In particular, you must pay Social Security taxes to be eligible. How much income you need to earn and pay tax on is based on your work credits. However, you can still get SSI if you haven’t paid taxes.
Yes, the IRS can garnish disability payments. This means they’ll take a percentage of your back pay and your monthly checks to cover your unpaid tax debt. You will get multiple letters in the mail before the IRS ever garnishes or levies your pay.
No. Even if you have unpaid state tax bills, only the federal government (the IRS) can garnish your Social Security disability payments.
SSDI might be taxable if you have other sources of income (including from a spouse) and your total income is above a certain threshold. SSI is never taxable.
In 2023, the maximum possible SSDI payment is $3,627 per month and SSI is worth up to $914 per month.
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