Back Pay and Overpayments of SSDI & Related Legal Issues
Unfortunately, many SSDI claims can take several months or even more than a year, especially if the Social Security Administration rejects the initial claim and forces the applicant to go through the appeals process. Back pay is money paid to an SSDI recipient for any time after they had applied for benefits and were eligible to receive them but had not yet been approved by the SSA. A five-month waiting period after the onset of a disability applies to the receipt of SSDI benefits, though. This may reduce the amount of back pay available to a claimant who applied for benefits shortly after their disability began. For example, if they became disabled and promptly applied for SSDI, but the process extended for 13 months, they could receive only eight months of back pay.
Receiving back pay may have tax implications for some (but not all) SSDI recipients. This is because it may increase the recipient’s taxable income for the year in which it was received. However, the Internal Revenue Service allows an SSDI recipient to allocate back pay to the year in which it should have been received. A recipient does not need to revise their previous tax returns. Form SSA-1099 will tell them how much of their back pay was owed to them in each previous year for which it was accrued, while IRS Publication 915 describes how to divide back pay among prior years. The resulting calculations may be tricky, so a recipient may want to consult a tax professional if this situation affects them.
Overpayments of SSDI Benefits
While back pay prevents a recipient from getting less money than they should have received, an overpayment occurs when a recipient gets more money than they should have received. The SSA will send a Notice of Overpayment when this happens. Reasons for an overpayment may include payments distributed after a disability ended, a failure to properly log information received from the claimant, inaccurately reported income, or continued receipt of SSDI benefits during an unsuccessful appeal of a decision to terminate them. Regardless of the reason, the SSA can take any amount of an SSDI payment to cancel out the overpayment as needed. However, a recipient can try to set up a payment plan if they cannot afford to lose their entire SSDI benefit during the period necessary to make up for the overpayment.
If a recipient thinks that the SSA is wrong about the overpayment or the amount of the overpayment, they can pursue an appeal to try to reverse the decision. They can continue receiving SSDI benefits while the SSA reviews the overpayment decision if they file their reconsideration request within 35 days after the date on the Notice of Overpayment. There is a firm deadline of filing a request for reconsideration within 65 days after the date on the Notice. If they do not prevail at this stage, a recipient can request a hearing before an Administrative Law Judge within 65 days after the date of the reconsideration denial letter.
Sometimes an overpayment occurs for which the recipient was not responsible. They can ask for a waiver in this case, while asking the SSA to refrain from collecting the excess amount until the matter is resolved. (A recipient with an overpayment less than $1,000 might be able to get an administrative waiver at their local Social Security office without submitting a form if the office finds that they were not at fault for the overpayment.) As with a reconsideration denial, a recipient can appeal a waiver denial within 65 days after the date of the waiver denial letter. A recipient can pursue reconsideration and a waiver simultaneously. If this happens, the SSA will review the request for reconsideration before the waiver request.
