FAQs Answers – Part 2

Many people who are seeking disability may have a long-standing condition, like diabetes or depression. Often they make the mistake of using the first date on which they received a diagnosis of their illness. This complicates matters in their cases, especially when a claimant has worked after the date.

Use too early a date and your waiting time for a hearing may be prolonged. Use too early a date and you will wait years for your hearing. Use too late a date, you may be past your last date for SSDI insurance and get nothing. As a rule of thumb, your alleged date of onset should be the day after the last date on which you were able to work at any job at a full time basis. This is often the date when a claimant finds himself or herself unable to work at all or only work a few hours per day or a couple of days per week because of a disabling condition. REMEMBER, ONE CAN HAVE A “DISABILITY” AND STILL NOT BE “DISABLED”.

There are three different ways to appeal. You can pick the appeal that fits your case. You can have a lawyer, friend, or someone else help you with your appeal.

• Case Review:
  You can give us more facts to add to your file. Then the SSA will decide your case again. You don’t meet with the person who decides your case.
• Informal Conference:
  You’ll meet with the person who will decide your case. You can tell that person why you think you’re right. You can give the SSA more facts to help prove you’re right. You can bring other people to help explain your case. You can pick this kind of appeal in all SSI cases except two. You can’t have it if the SSA turned down your SSI application for medical reasons or because you’re not blind. Also you can’t have it if the SSA is giving you SSI but you disagree with the date they said you became blind or disabled. In SVB cases, you can pick this kind of appeal only if the SSA is stopping or lowering your SVB payment.
• Formal Conference:
  This is a meeting like an informal conference. At this conference, the SSA can make people come to help prove you’re right. The SSA can do this even if they don’t want to help you. You can question these people at your meeting. You can pick this kind of appeal only if the SSA is stopping or lowering your SSI or SVB payment. You can’t get it in any other case.

The following list covers the vast majority of administrative actions that are initial determinations. However, they are not all inclusive.

For Title II Claims (Social Security Disability Insurance):

1. Entitlement or continuing entitlement to benefits;
2. Reentitlement to benefits;
3. The amount of benefits;
4. A recomputation of benefit;
5. A reduction in disability benefits because benefits under a worker’s compensation law were also received;
6. A deduction from benefits on account of work;
7. A deduction from disability benefits because of claimant’s refusal to accept rehabilitation services;
8. Termination of benefits;
9. Penalty deductions imposed because of failure to report certain events;
10. Any overpayment or underpayment of benefits;
11. Whether an overpayment of benefits must be repaid;
12. How an underpayment of benefits due a deceased person will be paid;
13. The establishment or termination of a period of disability;
14. A revision of an earnings record;
15. Whether the payment of benefits will be made, on the claimant’s behalf to a representative payee, unless the claimant is under age 18 or legally incompetent;
16. Who will act as the payee if the SSA determines that representative payment will be made;
17. An offset of benefits because the claimant previously received Supplemental Security Income payments for the same period;
18. Whether completion of or continuation for a specified period of time in an appropriate vocational rehabilitation program will significantly increase the likelihood that the claimant will not have to return to the disability benefit rolls and thus, whether the claimant’s benefits may be continued even though the claimant is not disabled;
19. Nonpayment of benefits because of claimant’s confinement for more than 30 continuous days in a jail, prison, or other correctional institution for conviction of a criminal offense;
20. Nonpayment of benefits because of claimant’s confinement for more than 30 continuous days in a mental health institution or other medical facility because a court found the individual was not guilty for reason of insanity; a court found that he/she was incompetent to stand trial or was unable to stand trial for some other similar mental defect; or, a court found that he/she was sexually dangerous.

Title XVI:

1. Eligibility for, or the amount of, Supplemental Security Income benefits;
2. Suspension, reduction, or termination of Supplemental Security Income benefits;
3. Whether an overpayment of benefits must be repaid;
4. Whether payments will be made, on claimant’s behalf to a representative payee, unless the claimant is under age 18, legally incompetent, or determined to be a drug addict or alcoholic;
5. Who will act as payee if the SSA determines that representative payment will be made;
6. Imposing penalties for failing to report important information;
7. Drug addiction or alcoholism;
8. Whether claimant is eligible for special SSI cash benefits;
9. Whether claimant is eligible for special SSI eligibility status;
10. Claimant’s disability; and
11. Whether completion of or continuation for a specified period of time in an appropriate vocational rehabilitation program will significantly increase the likelihood that claimant will not have to return to the disability benefit rolls and thus, whether claimant’s benefits may be continue even though he or she is not disabled.

Note: Every redetermination which gives an individual the right of further review constitutes an initial determination.

Title VIII (See VB 02501.035)

1. Meeting or failing to meet the qualifying and/or entitlement factors for special veterans benefits (SVB);
2. Reduction, suspension, or termination of SVB payments;
3. Applicability of a disqualifying event prior to SVB entitlement;
4. Administrative actions in SVB cases similar to those listed under Title II—items 3, 4, 10, 11, & 16.

Title XVIII (SSI)

1. Entitlement to hospital insurance benefits and to enrollment for supplementary medical insurance benefits;
2. Disallowance (including denial of application for HIB and denial of application for enrollment for SMIB);
3. Termination of benefits (including termination of entitlement to HI and SMI).
4. Initial determinations regarding Medicare Part B income-related premium subsidy reductions.

You may request a “Request for Reconsideration”, SSA-561-U2 form on line at http://www.socialsecurity.gov/online/ssa-561.pdf. You may find and complete your “Disability Report-Appeal” on line at http://www.socialsecurity.gov/online/ssa-561.pdf. You can call the SSA at 1-800-772-1213 or go on line to file your “Request for Hearing by Administrative Law Judge”, Form HA-601-U5 at the Social Security Website at http://www.socialsedcurity.gov/disability/hearing.

We have all the necessary forms ay our office, The Dilorenzo Law Firm located at 504 SE 8th Street in Ocala, FL.

This page gives general income tax guidance with citations, and should not be used as the basis for tax advice in individual cases. Taxpayers should always seek guidance from competent tax professionals, and should use this page only as an aid to asking the right questions.

Note: Social Security disability benefits and retirement benefits are treated the same for income tax purposes. SSI benefits are not subject to income tax.

• How should I handle income taxes on my retroactive lump sum payment of disability benefits?
• How much of my ongoing Social Security disability benefit is subject to income tax?
• What about my attorney fee for the disability appeal - is it deductible?
• I owe most of the Social Security lump sum to a long term disability carrier, so how do I avoid double taxation?

Congress has provided a special election allowing a client to take advantage of the tax exempt base amount for each of the retroactive years represented in a Social Security lump sum. [I.R. Code §86(e); see I.R.S. Publication 915] In most cases, this special election will be desirable, because it enables the taxpayer to offset the lump sum with a multiple of base amounts, described below. Also, the election removes the need to amend prior tax returns.

Social Security is required to send each benefit recipient an SSA-1099 by February 1 of the following year, specifying how much of the Social Security benefit received in the lump sum was really a payment for some prior year or years. The 1099 also lists the attorney fee. These SSA-1099 forms are often inaccurate, and the taxpayer must use award notices to double check the 1099.

The Basic Rule. Up to 50% of Social Security benefits are taxable if total “provisional income” (adjusted gross income, tax-exempt interest and one half of Social Security benefits) exceeds a base amount: $25,000 for single taxpayers and $32,000 for married taxpayers filing jointly. At this level, taxes are payable on the lesser of (1) 50% of Social Security benefits received, or (2) one half of the difference between provisional income and the applicable base amount. Fortunately, this is the end of the income taxation picture for most recipients of disability benefits.

The Second Tier. A second tier of income tax - reaching up to 85% of Social Security benefits received - kicks in (1) for single taxpayers with provisional income over $34,000, (2) for married taxpayers filing jointly with provisional income over $44,000, and (3) for all married taxpayers who file separate returns, but do not live apart.

For these second-tier categories, income taxes are payable on the lesser of (A) 85% of Social Security benefits or (B) the total of (1) 85% of the difference between provisional income and the applicable adjusted base amount ($34,000/$44,000), plus (2) the lesser of (a) half the benefits or (b) $4,500 (for singles / $6,000 (for married couples filing jointly). The adjusted base amount for married persons filing separately but living together is zero; taxes are payable on the lesser of 85% of benefits or 85% of provisional income.

Attorney Fee Deduction. If a taxpayer discovers that some of the Social Security lump sum - when added to regular benefits received in the same year - turns out to be taxable, the attorney fee may be deducted from income, but only to the same extent that Social Security is taxed. For example, if a taxpayer paid tax on 50% of SSA benefits received, the taxpayer may deduct half of the attorney fee paid or incurred during the same year. [IRS Revenue Ruling 87-102] The taxpayer faces the burden of filing an itemized return, of course, and this limited deduction is further subject to the “2% of adjusted gross” ceiling on miscellaneous itemized deductions.

Worker’s Compensation Reduction. Social Security disability may be reduced for worker’s compensation and other public disability benefits. Oddly, the amounts deducted are included as benefits received for purposes of income tax. In effect, state worker’s compensation is rendered taxable in an amount equal to the Social Security reduction, but only to the extent that Social Security is taxable for the year. [I.R. Code §86(d)(3)]

Auxiliary [child or spouse] benefits. Benefits are included in the taxable income of the person who has the legal right to receive them. For example, a child’s benefits are added to the child’s other income (if any) to determine taxability, even though the benefits are paid on the parent’s earnings record. The child receives a separate SSA-1099.

Income Tax Withholding. Voluntary Tax Withholding (VTW) from Social Security benefit income will help some taxpayers avoid quarterly estimated tax payments or an onerous lump sum due by April 15th. To begin or modify a withholding request, submit completed IRS Form W-4V to a local Social Security office. The available withholding rates are 7, 10, 15 or 27 percent. The form is posted on the Social Security web site: www.ssa.gov/taxwithhold.html

LTD reimbursement. What if the taxpayer used all or part of a Social Security back payment to reimburse a long-term disability carrier? Special tax relief is available under §1341 of the Internal Revenue Code, again avoiding the need to amend a prior tax return. See IRS Publication 525. If the repayment to the LTD carrier is under $3,000, the taxpayer gets a deduction on the current year’s tax return. For repayments over $3,000, the taxpayer chooses either the deduction or a tax credit for the excess tax paid in the prior year. A subtle tax issue to watch: LTD reimbursements to the carrier also cause “phantom” taxable income in some cases, due to the separate 1099 forms issued for the year by SSA and by the carrier.

Deductions for the Self-Employed. Since the self-employed pay all of their Social Security and Medicare taxes, these workers receive a Social Security tax deduction and an income tax deduction at tax time, designed to achieve parity with the employed, who do not pay FICA or income tax on the value of the employer's FICA tax payment. For the Social Security tax deduction, the self-employed deduct 7.65% of net earnings before computing the tax at 15.3%. For the income tax deduction, 50% of the net social security tax liability (after applying the Social Security tax deduction above) is deducted from gross earnings as a business expense.

1. Does the Claimant presently or did her/she during period of disability earn wages of $1,010.00. or more?

   At step one the ALJ must determine whether the claimant is engaging in substantial gainful activity (20CFR 404.1520(b) and 416.920(b)). Substantial gainful activity (SGA) is defined as work activity that is both substantial and gainful. If an individual engages in SGA, that individual is not disabled regardless of how severe that individual’s physical or mental impairments are and regardless of age, education, and work experience. If an individual is not engaging in SGA, the analysis proceeds to the second step.

2. Is there anything medically wrong with the Claimant that interferes with his/her ability to work?

   At step two, the ALJ must determine whether the claimant has a medically determinable impairment that is “severe” or a combination of impairments that is “severs” (20CFR 404.1520(c) and 416.920(c)). An impairment or combination of impairments is “severe” within the meaning of the regulations if it significantly limits the individual’s ability to perform basic work activities. If the claimant does not have a severe medically determinable impairment or combination of impairments, the claimant is not disabled. If the claimant has a severe impairment or combination of impairments, the analysis proceeds to the third step.

3. Does any or do several of the impairments meet a listing?

   At step three, the ALJ must determine whether the claimant’s impairment or combination of impairments meets or medically equals the criteria of an impairment listed in 20 CFR Part 404, Subpart P, Appendix 1 (20 CFR 404.1520(d), 404.1525, 404.1526(d), 416.925, and 416.909). If the claimant’s impairment or combination of impairments meets or medically equals the criteria of a listing and meets the duration requirement (20 CFR Part 404, Subpart P. Appendix 1 (20 CFR 404.1509 and 416.909), the claimant is disabled. If it does not, the analysis proceeds to the next step.

4. What is the Claimant able and not able to do, given his/her mental and physical limitations? Can he/she do his/her past jobs? Past jobs go back 15 years from the onset date and only jobs that the Claimant did long enough to be able to master them. A simple job generally does not take long to master (a few months), while a complex one does.

   Before considering step four of the sequential evaluation process, the ALJ must first determine the claimant’s residual functional capacity (20 CFR 404.1520(e) and 416.920(e)). An individual’s residual functional capacity is the individual’s ability to do physical and mental work activities on a substantial basis despite limitations from the individual’s impairments. In making this finding, the ALJ must consider all of the claimant’s impairments, including impairments that are not severe. (20 CFR 404.1520(e), 404.1545, 416.920(e), and 416.945; SSR 96-8p)
   Next, the ALJ must determine at step four whether the claimant has the residual functional capacity to perform the requirements of the claimant’s past relevant work (20 CFR 404.1520(f) and 416.920(f)). If the claimant has the residual functional capacity to do the claimant’s past relevant work, the claimant is not disabled. If the claimant is unable to do any past relevant work or does not have any past relevant work, the analysis proceeds to the fifth and last step.

5. In light of the residual functional capacity described above, since the Claimant cannot do his/her past work, what jobs can the Claimant perform?

   This area concerns vocational expertise. If a claimant has past relevant work in a given exterional category, then to get disability benefits, the claimant must not be capable of performing work in that extertional category, given his/her age, education and work experience. There are definitions for physical exertional categories and they apply whenever the claimant has a physical impairment. The code of federal regulations (CFR) 20 CFR §416.967, describes these physical exertion requirements as follows:
   
   Physical exertion requirements:
   
   To determine the physical exertion requirements of work in the national economy, we classify jobs as sedentary, light, medium, heavy, and very heavy. These terms have the same meaning as they have in the Dictionary of Occupational Titles, published by the Department of Labor. In making disability determinations under this subpart, we use the following definitions:
   
   (a) Sedentary work. Sedentary work involves lifting no more than 10 pounds at a time and occasionally lifting or carrying articles like docket files, ledgers, and small tools. Although a sedentary job is defined as one which involves sitting, a certain amount of walking and standing is often necessary in carrying out job duties. Jobs are sedentary if walking and standing are required occasionally and other sedentary criteria are met.
   
   (b) Light work. Light work involves lifting no more than 20 pounds at a time with frequent lifting or carrying of objects weighing up to 10 pounds. Even though the weight lifted may be very little, a job is in this category when it requires a good deal of walking or standing, or when it involves sitting most of the time with some pushing and pulling of arm or leg controls. To be considered capable of performing a full or wide range of light work, you must have the ability to do substantially all of these activities. If someone can do light work, we determine that he or she can also do sedentary work, unless there are additional limiting factors such as loss of fine dexterity or inability to sit for long periods of time.
   
   (c) Medium work. Medium work involves lifting no more than 50 pounds at a time with frequent lifting or carrying of objects weighing up to 25 pounds. If someone can do medium work, we determine that he or she can also do sedentary and light work.
   
   (d) Heavy work. Heavy work involves lifting no more than 100 pounds at a time with frequent lifting or carrying of objects weighing up to 50 pounds. If someone can do heavy work, we determine that he or she can also do medium, light, and sedentary work.
   
   (e) Very heavy work. Very heavy work involves lifting objects weighing more than 100 pounds at a time with frequent lifting or carrying of objects weighing 50 pounds or more. If someone can do very heavy work, we determine that he or she can also do heavy, medium, light, and sedentary work.
   
   Generally, but not always, to get disability a person whose condition does not meet a listing must show that he/she is not capable of performing a sedentary work on a full time basis. Older people, those 50 and over, may be able to get benefits with the ability to work at light levels, depending on age, education, and work history and whether they learned any skills that could be used in other jobs (what is referred to as transferability of job skills).

   Mental impairments limitations
   
   These impairments consider a completely different set of circumstances. The CFR describes the limitations generally as follows: “A limited ability to carry out certain mental activities, such as limitations in understanding, remembering, and carrying out instructions, and in responding appropriately to supervision, co-workers, and work pressures in a work setting, may reduce your ability to do past work and other work.” 20 C.F.R. §404.1545(c). The various limitations described in the mental residual functional capacity questionnaires address these limitations. The ability to function in the following categories is weighed: 1) activities of daily living (grooming, getting to and from work, ability to shop for food, maintain a household) ; 2) social functioning (ability to get along with and interact with people) 3) concentration, persistence and pace (ability to pay attention to work instructions and requirements); 4) episode of decompensation (hospitalizations, times when person is unable to leave home due to mental illness). An important factor for many Claimants is the ability to maintain concentration, persistence and pace, but all factors should be considered.
   At the last step of the sequential evaluation process (20 CRF 404.1520(g) and 416.920(g), the ALJ must determine whether the claimant is able to do any other work considering the claimant’s residual functional capacity, age, education and work experience. If the claimant is able to do other work, the claimant is not disabled. If the claimant is able to do other work and meets the duration requirement, the claimant is not disabled. Although the claimant generally continues to have the burden of proving disability at this step, a limited burden of going forward with the evidence shifts to the Social Security Administration. In order to support a finding that an individual is not disabled at this step, the Social Security Administration is responsible for providing evidence that demonstrates that other work exists in significant numbers in the national economy that the claimant can do, given the residual functional capacity, age, education, and work experience (20 CFR 404.1512(g), 404.156(c), 416.912(g), and 416.960(c)).