How to File Taxes on a Long-Term Disability Lump Sum
Filing tax on long-term disability money as lump sump is not a difficult process. However, calculating loan on the money is not easy due to application of different rules. If you are receiving benefit from one source, private or corporate, only one set of rules applies. If you are claiming benefit from social security department, a number of rules apply. So calculate your disability lump sump carefully, and then determine the level of taxes you have to apply for. You might search online how you can calculate the tax.
Instructions
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1
Calculating Taxable Income
Calculating your taxable income is easy, if it is from one source. However, calculating taxable income from other sources is difficult. For example, if you pay the insurance premiums from your own pocket and do not deduct them from the tax return, then your all income, whether lump sump or otherwise, is tax free. However, if your employer is paying for the premiums or you deduct it from the tax return then all your income is taxable and you should calculate the amount tax. -
2
Social Security Disability Income
If your receive benefit in lump sump under social security disability, the amount you receive is retroactive to previous years' expense. It is better not to count the entire amount in the year you receive it, instead spread it over all the previous years. If you calculate it as lump sump in the year you receive it, the money is then taxable income and you will have to pay taxes on it. -
3
SSA-1099
Carefully fill out all sections in the SSA-1099 form. You will have to mention the lump sum amount in the portion of income, and then mention taxable and non-taxable income. You should mention the retroactive amount over the years for which you have received the benefits. However, mentioning the amount in one section of the form does mean you have to pay taxes on the entire amount. -
4
Search IRS Website
You can thoroughly search the IRS website to find out how you can calculate the tax on your income. The department has various excel calculation sheets and you can put in your income figures and the amount deducted on the tax return and you can know how much tax you have to pay. Make sure you also take into count the amount that you have been paying in the insurance premiums and other commercial liabilities. If you do so your income is tax free.
