Soc. Sec. Benefits and back years

[WhiteOleander]

Someone is trying to apply for Soc. Sec. disability. They have not filed returns since 1996.

If they file that far back now will the IRS accept them? Or do they only let you file 6 years back? (someone said unless the returns were requested, the IRS only goes 6 years back???)

Also, I am assuming ( don't ever assume) that the SE would get credited for their disability.

Anyone have any experience with this? How long it takes to circulate through to the SSA?

Thanks

[Kram BergGold]

Partial Answer

Taxpayers are required to file every year. Even though the IRS sometimes lets people just file the seven most recent years it does not mean the others are not required. So yes, you can file back to 1996. I believe if the person reports SE income for those yeears that they will get SS credit for them. Although maybe SS has a limit on how late the info can be received.

[WhiteOleander]

Thanks,
I was thinking that they could take the tax returns to the SSA after they're filed. Maybe that would speed up getting the info to the SSA.

[gkaiseril]

Use Current Year Select Method

Since your client is applying/appealing to receive SS Disability for the prior years for which it is not known whether he/she was entitled to those benefits for the past years, no reporting of the possible award is done until one receives the payment. At that time all the prior years' benefits are paid. The taxable portion is computed by either using the current year income and all the benefits to figure the taxable part of the payment or one may elect to compute the taxable portion based on each of the prior year's income and prior's income. If one uses the latter method, the taxable benefits are included in the current year's return, no adjustments are made to the prior years' returns.

There are special worksheets for computing the taxable portion of the lump sum payments. See IRS Pub 915 pages 10 - 13 for the explanation and examples and page 15 - 18. For the worksheets needed to compute the taxable portion using both methods and how to report the amounts and marginal entries when the optional Lump Sum Election is used. One will need to complete Worksheet 2 (benefits for years after 1993) or 3 (benefits for years before 1994) for each prior year and Worksheet 4 will summarize and compare the results of both methods and determine the most beneficial method for the taxpayer.

http://www.irs.gov/pub/irs-pdf/p915.pdf IRS Pub 915 Social Security Benefits and Equivalent Railroad Retirement Benefits

[WhiteOleander]

Since your client is applying/appealing to receive SS Disability for the prior years for which it is not known whether he/she was entitled to those benefits for the past years, no reporting of the possible award is done until one receives the payment. At that time all the prior years' benefits are paid. The taxable portion is computed by either using the current year income and all the benefits to figure the taxable part of the payment or one may elect to compute the taxable portion based on each of the prior year's income and prior's income. If one uses the latter method, the taxable benefits are included in the current year's return, no adjustments are made to the prior years' returns.

There are special worksheets for computing the taxable portion of the lump sum payments. See IRS Pub 915 pages 10 - 13 for the explanation and examples and page 15 - 18. For the worksheets needed to compute the taxable portion using both methods and how to report the amounts and marginal entries when the optional Lump Sum Election is used. One will need to complete Worksheet 2 (benefits for years after 1993) or 3 (benefits for years before 1994) for each prior year and Worksheet 4 will summarize and compare the results of both methods and determine the most beneficial method for the taxpayer.

http://www.irs.gov/pub/irs-pdf/p915.pdf IRS Pub 915 Social Security Benefits and Equivalent Railroad Retirement Benefits

Thanks, but that's not what I was asking.

They are applying for the disability. Because they have not filed taxes as self employed since 1996 or worked anywhere else, they don't show anything paid into the SSA..
They want to file the tax returns now to get the SSA benefits paid in.

Not sure if this will fly with SSA or not.

[Bird Legs]

Prior Years tax returns

Yes, this should work. Have done it several times myself, for clients. As long as enough quarters are paid in.

[WhiteOleander]

Yes, this should work. Have done it several times myself, for clients. As long as enough quarters are paid in.

Thanks very much

[wv112]

Social Security will only accept the last 3 years for social security purposes. So only 12 quarters will be applied to the account. This may not qualify the person for enough quarters to draw disability from social security.

You still have to file and pay the tax for all the years to IRS.


The next step would be to apply for SSI if the the person can met the income and support qualifications for this.

[Zee]

Yes, this should work. Have done it several times myself, for clients. As long as enough quarters are paid in.

I'd like to make sure I understand this. The taxpayer hasn't filed taxes for 11years, but he had self-employment income subject to SE taxes. At this time, the taxpayer would like to benefit/collect SS disability benefits. As such, the TP wants to file tax returns for the prior years and pay any federal taxes, state taxes, and SS & medicare taxes plus interest and penalties due. If these are paid and there are enough quarterly earnings, the SS administration will consider the disability claim. Is that correct?

I'm curious...how much earnings must be reported to qualify? I would think the taxes, interest and penalties would be substantial. And, frankly isn't the taxpayer admitting tax fraud or gross negligence in not filing?

Please...don't misinterpret this post as being critical of the answer or your client. This is certainly a strategy I wouldn't have thought of...it's interesting.

[Bird Legs]

Zee, your

comments are taken in a very positive liight. They are valid questions.
The way the question was posted, I would say there was no fraud, There was
no misinterpretation of facts, just no returns filed. Yes, penalties and interest.
However, How old is this person? If he could collect $900. per month, how long
would it take for him to recover his money?
Also, in this instance, the client could file just the back 6 years returns, not all
11 years.

[Bird Legs]

Back Soc. Sec. payments Answer

Believe you can find your answer in TTB on page 22-1 & 2.

[Joe Btfsplk]

To qualify for SS

Page 22-2 of TTB indicates that you need 40 quarters with $1000 income to qualify at age 62--less if retiring on disability at an earlier age. If your SS is based on this small an amount, you will draw a very small amount of SS.

If you earned $ 3000 back in 1936, it would probably count like earning $60,000 or more this year.

[WhiteOleander]

I'd like to make sure I understand this. The taxpayer hasn't filed taxes for 11years, but he had self-employment income subject to SE taxes. At this time, the taxpayer would like to benefit/collect SS disability benefits. As such, the TP wants to file tax returns for the prior years and pay any federal taxes, state taxes, and SS & medicare taxes plus interest and penalties due. If these are paid and there are enough quarterly earnings, the SS administration will consider the disability claim. Is that correct?

I'm curious...how much earnings must be reported to qualify? I would think the taxes, interest and penalties would be substantial. And, frankly isn't the taxpayer admitting tax fraud or gross negligence in not filing?

Please...don't misinterpret this post as being critical of the answer or your client. This is certainly a strategy I wouldn't have thought of...it's interesting.

I totally understand the point you are making.

This is actually a client of someone in another office. I was asked if I knew anything about how SSA would view the attempt to file the back years to now qualify for disability.

I asked the same questions. If they can afford to pay the back taxes, how will they qualify for the disablility? But, perhaps another family member will pay in what is needed??? I really just don't know. It seems a little shaky to me too.

[Zee]

comments are taken in a very positive liight. They are valid questions.
The way the question was posted, I would say there was no fraud, There was
no misinterpretation of facts, just no returns filed. Yes, penalties and interest.
However, How old is this person? If he could collect $900. per month, how long
would it take for him to recover his money?
Also, in this instance, the client could file just the back 6 years returns, not all
11 years.

Perhaps "fraud" was a poor choice of words. I'm not sure what the right term is. This appears to be a taxpayer that intentionally didn't file tax returns to avoid paying SS taxes (and most likely federal & state income taxes) on self-employment income. Now, that it's "convenient" and "beneficial", the TP has decided to file to collect SS disability. I must admit I don't like the technique. But, if it works it's the responsibility of his tax advisor to act in the best interests of the client.
However, if "tax fraud" is the wrong term. What is the term to describe a "willful failure to file". Penalties for failing to file should be the maximum in this situation.

[Black Bart]

How far back...

I really don't know. I have filed three years back on such, but not further than that. This is not all that unusual though. I've had a few clients pay almost nothing over the years and when they sign up and find out the check's going to be chickenfeed, they suddenly "get religion" and want to file a bunch of back years with plenty of nice profits.

But anyhow, I suppose you could just call the national SSA number and ask this without giving client's name; telling them you're an accountant who needs to know for general information purposes. It's 800-772-1213.

P.S. I regret to inform you that I'm sending you (didn't you say you were a Block representative?) another PIA case effective tomorrow morning. You'll recognize the belligerant ignoramus by his distinct body odor, a whiff of which is sufficient to fell an ox.