Many people who are awarded SSDI benefits receive a lump-sum payment to cover back pay for the months between their official date of disability onset and when they were finally awarded benefits.

When is a lump sum ( backpay ) disability payment awarded?

When you are owed disability back payments from the date you applied, or earlier, you may be paid in a lump sum – often referred to as “backpay”. By Aaron Hotfelder, J.D., University of Missouri School of Law

What do you need to know about a lump sum payment?

Lump sums are things like a retroactive check, an inheritance or a gift. It gives different ideas for spending or saving the lump sum. It tells you how to report it to Social Security. It tells you how to get help if you have questions about lump sum payments.

When do you get paid back on Social Security disability?

When you are owed disability back payments from the date you applied, or earlier, you may be paid in a lump sum – often referred to as “backpay”. Anyone familiar with the Social Security disability system is aware of the long delays that can occur between an initial application for benefits and an eventual approval.

How to report a lump-sum Social Security benefit?

I received a lump-sum Social Security benefit covering several prior years. How do I report that on my tax return? You must report the entire lump-sum in the year you receive it. Generally, you use your current-year income to figure the taxable part of the total benefits received in that year.

How is the amount of Social Security disability taxed?

Up to 50 percent of Social Security Disability benefits are taxable each year. “The actual amount is determined by adding one-half of the taxpayer’s SSDI benefits to all of his or her other income sources. A federal income tax return must be filed if gross income is over a certain amount per IRS…

Can a lump sum payment be reported on a tax return?

You can’t amend returns for prior years to reflect social security benefits received in a single lump-sum in the current year. You must include the taxable part of a lump-sum payment of benefits received in the current year (reported to you on Form SSA-1099, Social Security Benefit Statement) in your current year’s income,…