soc sec disabiltiy

[gman]

Can social security disability qualify as income for EIC.?

[MLINDER42]

Social Security Disability

No.Disability pension is considered earned income because it is from an insurance co and you or your employer paid for it.The government is giving you your disability it is not taxable so it is not earned income.

[jimmcg]

Can social security disability qualify as income for EIC.?

NO, read IRS Pub 596.

[taxjungle]

IRS Pub. 4808 (brochure) addresses this question. Social Security Disability benefits are not considered earned income for EITC, BUT if retired on disability, taxable benefits received under the employer's disability retirement plan are considered earned income UNTIL reaching minimum retirement age. ( see IRS Tax Tip 2011-24)

[Burke]

In other words, if your TP is receiving a W-2 for disability income, it is earned income until their "minimum retirement age," which can vary by employer plan. After that, it should come in via 1099-R. However, in many cases they continue to be issued W-2's after that date, which is incorrect, but it happens. Social Security disability will be on Form SA-1099.

[PIGLEE]

My client is 54, and has a child. His disability is from a government retirement, it is reported on a 1099R it is marked 3-disability. He also received Social Security. I don't do many EIC returns, but it looks like some disability could qualifies him for EIC. But because this is on a 1099R, does that disqualify him? They have no other earned income.

[MilTaxEA]

If I remember correctly, disability will count as wages (and is reported on line 7 of the 1040) until the taxpayer reaches retirement age. After that point it becomes a retirement payment and is reperted accordingly.

[MilTaxEA]

I looked this up and found a cite in Pub 17:

If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.

It sounds like it would be "earned income" since it is wages if they haven't reached retirement age. Is the disability reported on a W-2 until retirement age and then they switch over to a 1099R? Can't remember for sure.

[ToledoEd]

I have a client on disability from her State of Ohio job and it is reported on a 1099R, marked with a code 3 for disability. It does qualify as wages until she reaches minimum retirement age, and does count for EIC. Most payers will report the payments on a 1099R and it is up to the taxpayer to report it correctly. My software, Drake, does have check boxes on the 1099R screens for "Is pension for disability?" and "If so should it be reported as wages on 1040?"

[PIGLEE]

WOW, I am also a Drake user for 10 years, never saw that before. THANK YOU, My gut feelings are usually worth checking into.

[MilTaxEA]

I looked this up and found a cite in Pub 17:



It sounds like it would be "earned income" since it is wages if they haven't reached retirement age. Is the disability reported on a W-2 until retirement age and then they switch over to a 1099R? Can't remember for sure.

Woops, I din't read that it was SS disability. I don't know how that is reported, my quote above was for standard worker's disability (not sure if it applies to SS). Never had a client with SS disability yet...

[FEDUKE404]

Cleaning my glasses here

The original post was about EIC for Social Security disability benefits.

That is a firm "nada" - considering the fact that EIC stands for earned income credit.

A person who retires/leaves work due to disability and receives income from his employer may receive taxable "wages" which at some point (retirement age) switches over to "retirement" income.

Most tax software will query you via the Q&A as to which line on the Form 1040 such payments go.

[Burke]

Check the dates. The original post was back in NOV and did concern SS disability. Piglee evidently tagged on that thread today to post a different scenario -- Form 1099-R. Piglee will have to check on her particular client's normal retirement age with his (govt) employer to determine if this is still considered wages or not.