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Tax Treatment of SSDI Benefits and Lump Sum Payments

With delays in the Social Security decision making process reaching 3 years, those fortunate claimants who are approved will end up with large lump sum payments.  I have seen several instances where the lump sum benefit check exceeded $50,000.

A question I hear more and more has to do with the tax implications of lump sum Social Security payments.  I found a helpful article at the MarketWatch web site that gives a nice overview of Social Security disability benefits and taxes.  This article was written by Eva Rosenberg a/k/a TaxMama.

Depending upon your household income, some of your SSDI payments may be treated as income for tax purposes.  In 2007, for a husband and wife filing jointly, if you joint income (including your SSDI payment) falls below $32,000, 50% of your SSDI benefit is taxable.  If you income exceeds $44,000 annually, 85% of your SSDI benefit is taxable.

Your lump sum SSDI payment is eligible for special treatment by the IRS – there are rules that allow you to spread out the taxes over several years.  Rosenberg notes that the calculations pursuant to IRS Publication 915 can be complex, so you may want to engage the services of a CPA or enrolled agent to help you.

For more information check out Rosenberg’s TaxMama.com site, which offers a great deal of useful and easy to understand tax help.

[tags] tax treatment of SSDI benefits, tax treatment of Social Security lump sum payments, TaxMama, Eva Rosenberg [/tags]

Pre-hearing Conference to Expedite Hearing Decision

I have a question. My attorney’s paralegal called me last week and told me that my attorney and an administrative law judge will meet to discuss my case (without me) in an effort to make a decision quicker. She said that if the law judge ruled in favor of my case, that would be it. She said, if he or she ruled against me we would wait for our hearing as we have been waiting for the past two years. Does this make sense? Have you heard of this? thank you.

–Sheila

Jonathan Ginsberg responds:  Sheila, what you are describing is something called a "pre-hearing conference."   Pre-hearing conferences are a little unusual in Social Security cases, but certainly not improper.  A pre-hearing conference can be requested by a lawyer to speed up the process or it can be requested by the judge.   Sometimes judges will flag certain cases for pre-hearing because they look strong enough to be granted "on-the-record" without the need for a hearing.

In my experience, judges will use a pre-hearing conference to approve a case or to narrow the issues.  For example, the judge may be prepared to approve your case, but he may want to change the onset date for your disability.

Generally, it is good news if the judge wants to hold a pre-hearing conference.  Your lawyer can tell you what happened and hopefully, you will be on the road to an earlier approval.

[tags] pre-hearing conference, administrative law judge, on-the-record decision, Social Security, Social Security disability, SSI [/tags]

How I Won a Disability Hearing for a Deceased Claimant

With delays in the Social Security disability adjudication process taking as long as three years, it is inevitable that a claimant will pass away while waiting for a hearing.  Today, I tried a disability case for one of those individuals.

My client initially met with me in June of 2004 and he passed away in January of 2006 at age 60.  The hearing held today, therefore, covered a closed period of disability from his onset date (September, 2000) through the date of his death in January, 2006.  Although my client passed away, his claim for disability benefits remained active, with his wife being substituted as the claimant.

My client died of a heart attack, although cardiac problems were not the basis of his disability claim.  Instead, his claim for disability arose from mental health issues – severe depression, anxiety, panic disorder and bi-polar condition.  My client was a highly educated individual – and he had graduated from college and law school (although he never practiced law).  His past work was in the banking industry where he worked at a very high level position and was responsible for millions of dollars.

When I originally met with this gentleman he told me that he had been fighting symptoms of depression and panic for several years, but that by September, 2000, he had reached the point where he was unable to function.  After being fired from his last banking job, he had worked part time managing investments for a few relatives and close friends.

The medical record from the treating psychiatrist was fairly solid, and it showed regular, on-going treatment and high levels of powerful psychotropic medications.  The record also hinted at the occasional overuse of alcohol, although in my view the mental health problems existed independently of any alcohol issues.  As you  may know a claimant is prohibited from collecting disability benefits if the judge finds that alcohol abuse is a “material contributing factor” to a his disability.

I met with my client’s widow a little over a week prior to the hearing and we practiced the questions she was likely to face.  I expected that the issue of alcohol use would be a primary focus of the judge.  The judge in this case, by the way, was a new judge so I was unable to describe in much detail exactly how the hearing would be conducted.

When we got to the hearing, I learned that the judge had requested a medical expert – in this case a psychiatrist – to appear and testify.  My experience with medical experts has generally been good although adverse testimony from a medical expert will pretty much spell doom for any case.

The judge started the hearing by questioning my client’s widow about her observations regarding her husband’s behavior.  I felt that as a witness, my client’s widow was nervous and she almost seemed reluctant to speak badly of her late husband.  Although she hinted at several significant behaviorial problems, I felt like we needed to get some of those issues more clearly on the record.

Because she and I had spoken at length about specific incidents where my client had acted inappropriately or in a bizarre manner, I asked a few questions that were probably leading in nature.  Fortunately, my client’s widow saw where I was headed with this and she clearly related several stories describing behavior that indicated a severe underlying mental health problem.

The medical expert testified that the psychiatric record was very comprehensive and entirely consistent with my client’s testimony.  He also pointed out that the large number of medications my client was consuming would have significant work limitations.  He concluded by stating that he felt my client met the listing at 12.04 for bi-polar disorder.

The medical expert also took notice of my client’s educational achievements and his work history.  In my mind the implication was clear – a highly educated and well compensated professional would not give up his career with the hope that he would recover Social Security benefits.s

The judge accepted the medical expert’s testimony and issued a bench decision approving the claim.

I think that the factors that were extremely persuasive here included:

  • my client’s work and education background – helped establish credibility
  • the medication list
  • the record of consistent treatment – monthly visits to the psychiatrist since the onset date
  • the witness’ testimony regarding incidents of behavior inconsistent with competitive work

Trial Work Period Earnings After Benefits Awarded – Will Benefit Amount Increase?

Dear Jonathan, I had a question posted several months ago concerning working full-time after being granted SSDI, and I had another related question. I’m currently working full-time as a computer programmer, which is the type of job I had previously. If I were to stop working again because of health reasons, and return to SSDI, would the social security taxes I’ve paid in the past year result in an increase to my SSDI benefits, or would the amount remain the same? Thank you.
–Morris

Jonathan Ginsberg responds: Morris, good to hear from your again, and thanks for the question. Here are my thoughts:

  1. if you are working again after being found disabled, you can collect your regular income for 9 months without affecting your disability pay. This is called the 9 month trial work period.

  2. after the nine months, you go into an extended trial work period for 36 months. During any month during that 36 month period where your earnings drop below the substantial gainful activity limit, you will recieve a disability check for that month.

  3. I believe that if you have added earnings to your record, the rolling period of eligibiltiy (date first insured and date last insured) will adjust as would your benefit amount. I am not aware of any provision in the law that prevents additional earnings from increasing your SSDI benefits, but I have not ever seen this question posed. If anyone reading this has a different opinion, or, Morris, if you discover the answer one way or the other, please let me know.

[tags] trial work period, earnings after disability award, extended trial work period, Social Security disability [/tags]

Can a Claimant’s Testimony at a Hearing Ruin a Case?

Can something I say at my Disabilty hearing cause me to lose my case? My ALJ asked me if my RA had gotten worse since I quit working, I replied no, and he said "so it doesnt get worse with movement?", I replied "no" to that too, but he didnt ask me why I said that and my lawyer told me not to elaborate and to just answer the question.

What I didnt get to say is that it does not have anything that triggers it , if im working hard or sleeping it comes on and nothing stops it, and the pain has always been unbearable! and that is why I dope myself up to the point of being looney! I feel my lawyer should have asked me to explain why I answered as I did, since he told me not to elaborate in the first place!

Now Im worried the ALJ has the wrong impression and hoping he just goes by the medical evidence I presented as it is all in my favor. Did I blow it by keeping my mouth shut?

–Sherry

Jonathan Ginsberg responds:  Sherry, my experience has been that judges rely more on the medical evidence in a claims file and less on the testimony of a claimant. That being said, some judges can take a statement like the one you described and use it as a basis to deny a claim.

In a case of RA (rheumatoid arthritis), I suspect that the medical record will be fairly complete so I would not stress out too much about your "incomplete" answer. You may want to ask your lawyer to send a short post-hearing brief to the judge to clarify what you said.

You did not tell me what questions were posed to the Vocational Expert – if the question only described mild impairments and resulted in an answer from the VE describing a large variety of jobs, then I would be concerned.

At the end of the day strong support from a treating doctor, preferably including functional capacity forms or Listing checklists will carry the most weight for most judges.

Please email me to let me know what happens – I’ll update this blog post when you do.

[tags] ALJ hearing, rheumatoid arthritis, vocational witness testimony, Social Security disability claimant testimony [/tags]

 

 

Social Security Earnings Credits for Military Veterans

I receive a number of inquiries about Social Security earnings credits for veterans.  In researching this issue, it appears that Social Security has a mish-mash of rules about how to credit service hours for veterans, especially for military service in World War II, the Korean War and even Vietnam.

Here is the link to a page that summarizes rules about Social Security earnings credits for veterans.  It appears to me that there is no single answer to this question – it appears that the years of service and the status of the serviceman or servicewoman determine how many credits are awarded.

Social Security has also published a booklet that summarizes the rules for calculating Social Security earnings credit for veterans of military service.  These rules include the following:

If you served in the military from 1940 through 1956, including attendance at a service academy, you did not pay Social Security taxes. However, SSA will credit you with $160 a month in earnings for military service from September 16, 1940, through December 31, 1956, if:

  • You were honorably discharged after 90 or more days of service, or you were released because of a disability or injury received in the line of duty; or

  • You are applying for survivors benefits based on a veteran’s work and the veteran died while on active duty.

You cannot receive these special credits if you are receiving a federal ­benefit based on the same years of service, unless you were on active duty after 1956. If you were on active duty after 1956, you can get the special credit for 1951 through 1956, even if you are receiving a military retirement based on service during that period.

If you served in the military from 1957 through 1977, you are credited with $300 in additional earnings for each calendar quarter in which you received active duty basic pay.

If you served in the military from 1978 through 2001, you are credited with an additional $100 in earnings, up to a maximum of $1,200 a year, for every $300 in active duty basic pay. After 2001, additional earnings are no longer credited.

If you began your service after September 7, 1980, and did not complete at least 24 months of active duty or your full tour, you may not be able to receive the additional earnings. Check with SSA for more information.

If you are dealing with this problem, do not hesitate to contact your Senator or U.S. Representative’s office for help.

[tag] Social Security earnings credit for veterans [/tag]

Disability Applicant Asks About Auxiliary Benefits for Her Children

I am disabled due to Avascular necrosis, fibramyalgia, and arthritis, I have undergone 7 surguries in past 4 years and have several more to go. I am an RN, so I made good money before moving to part time work then to being unable to work. My husband makes between 65,000-70,000 a year, we have 2 children ages 2 and 4, will I be able to collect benefits for them?

–Jamie

Jonathan Ginsberg responds: If you are eligible for Title II benefits, then your dependents would be eligible for auxiliary benefits. As you may know, SSA looks at the ten years prior to the onset of your disability to determine eligibility. If you have at least 20 covered quarters during this ten year period, you would be eligible. I have written more about the earnings requirements for Title II here.

You describe “moving to part time work,” but you do not say how long that process took or how it impacted your earnings. What you need to find out here is something called your “date last insured” for Title II. Sometimes you can get this information directly from Social Security by phone, or you can request it in writing using a Form 7004 – Request for Statement of Earnings & Benefits, which you can download at my law firm web site.

If you can show SSA that the onset date for your disability is before your date last insured, you are in good shape for Title II.

My concern here has to do with part time work. As I have noted before on this blog, part time work tends to muddy the water when it comes to disability. SSA often sees things in black and white, and some fact finders (adjudicators or judges) take the position that if you can work part time, you could also work full time at a less demanding job.

On the other hand, the medical problems you describe seem serious enough that you ought to be approved for benefits. Hopefully, you will not have any problems qualifying for Title II as your husband’s income would eliminate your eligibility for Title XVI SSI.

I’ve Been Waiting Two Years for a Hearing – Is this “Normal?”

jonathan, i have had fibro., chronic severe depression for years withrecent dx. of recent dx of some short term memory loss. i have a lawyer case has been somewhere in greensboro nc courts for two years now. all my problems have gotten worse and i do report in every time i see all all my md i never hear from the lawyer is this normal?
–Nancy

Jonathan Ginsberg responds:  Nancy, thanks for your email.  I hate to use the word "normal," because every lawyer handles his/her cases differently and every Social Security hearing office has different time issues with regard to scheduling hearings.

Here in Atlanta, a two year wait is typical.  I do think that you should be hearing something from your lawyer’s office every few months or so, even if you are hearing from a paralegal to update your medical treatment record.  You don’t say who your lawyer is, and I don’t necessarily need to know.  I can tell you, however, that if your attorney has nothing to report to you because the system is flawed (i.e. it takes years to get a hearing),  you can’t really expect him to call you every month to tell you that he has not heard anything.  Realize that your lawyer probably has 100 to 300 other cases – if he spent all of his time calling clients to say he had nothing to report, he would not get much done!

If you have not done so, call your lawyer’s paralegal to ask for an update.  Try to get the paralegal’s email as well as email is a much more time efficient means of communication.

It sounds as if you have a decent case – best of luck to you.

Is a Two Year Wait for My Hearing Normal?

My husband filed an appeal in Jan. of 2006. We have not had an appeal hearing nor is one scheduled. We were told that it could take up to 2 years for an appeal hearing is this true? How can we move it along (or can we)?
–Theresa

Jonathan Ginsberg responds: Theresa, thanks for your question. Unfortunately, what you were told about the delays in the system is correct. You may be waiting as long as two years to get a hearing.

Right now, Social Security has a lot of administrative problems. There are not enough judges and Congress has actually cut the Social Security Administration’s budget. In recent testimony before Congress, the Commissioner of SSA told Congress that she needed to hire more than 100 judges, but there is no money to do so.

Social Security is also attempting to eliminate paper files in favor of electronic (scanned document) files. At the same time, they are rolling out a new appeals process.

In my view, the delays and confusion will get worse before it gets better. For claimants like your husband, there is not much you can do other than to continue to treat with his doctor and to keep your lawyer updated as to changes in treatment or medicine.

You may also want to contact your U.S. Representative or U.S. Senator’s office to ask if they can write a letter to your local hearing office about the status of your husband’s case. Sometimes a letter like this may speed things up.

[tags] SSDI hearing, Social Security delays, Social Security appeals [/tags]

Is there a Time Limit for Social Security to Schedule My Consultative Exam?

I applied for SSDI and SSI benefits in March of 2006. I understand there is a 5 month wait period before benefits are awarded. I was requested to take a few "Consultative Exams" in December of 2006, 9 months after I initially appied for benefits, and my attending physician for Juvenile Diabetes sent SSA the information they requested in a timely manner. My question is if there a time limit for SSA to request a CE from the date of the initial application?
–Don

Jonathan Ginsberg responds: Don, thanks for your question – you raise a number of interesting points. The short answer to your question is "no," there is no time limit for SSA to request a CE following the date of the initial application.

SSA may have internal policies with suggested time limits for requesting a CE but I know of no formal requirements.

You make the point that you applied 9 months ago. I have found that some adjudicators are reluctant to approve a case until the claimant has been disabled for at least 12 months. The law says that you must be unable to engage in substantial activity (i.e., work) or that your condition is likely to keep you out of work for 12 months. Some adjudicators feel uncomfortable about recommending an approval for a person who has not actually been out of work for 12 consecutive months.

I have seen a few cases where the adjudicator kept the file on her desk until the 12 month date passed then approved. I also think it is a positive sign that SSA is scheduling consultatives for you.

[tags] substantial gainful activity, consultative evaluation, social security disability, 5 month waiting period, disability adjudicator [/tags]

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