Back Pay regarding Federal Income tax
 

I was wondering if you are required to have Federal Income Tax withheld from your back pay? I know that a portion of it is taxable, but I'm wondering if they have to take it out upfront. Thanks

There is a tax form you can get, that I cant remember right this minute the name of lol. But anyways it lets you divide the lump sum up into the years that the backpay was for.

I also need to do this, but was told by the IRS not to worry about it until 2009 when the Social Security will send the tax information. Then is when we will need that form.

I do know if you want more information just go over to irs.gov and do a search for lump sum, and it will have all the information you need. :winky:

Not everyone can deduct the SSDI money into the appropriate years. I was not allowed to do so. It gets VERY complicated and frustrating. I paid a tax man to do it.

For example, I was told I could NOT write a check to the IRS, I had to WITHHOLD all the money I owed or pay a penalty. I paid a penalty. This was not all due to the size of the check from SSDI, I knew I was being sent out of town to a hospital for a long period of time (we were gone almost 6 weeks), so I cashed in a life insurance policy before I knew I was getting the SSDI check, which pushed my income up for that one year. YOU may be able to deduct it in separate years, but...... it is not "automatic".

Good luck with it, I hope you can divide it.

It's IRS Publication 915 which, when I read it to figure out how to do this when tax season comes, is unfortunately very confusing. A lot of "if/then" scenarios and worksheets to fill out. However, there's some very good information out there about how much of your benefits (in general) are taxable and how to complete the Lump-Sum Election process, which gives you the opportunity to see whether it's beneficial to break the payment into different tax years. If I'm understanding the publication correctly, you will not be asked to file amended returns for prior years.

There was a column that was helpful to me. If you type "Figuring Out the Taxability of Retroactive SSDI Payments site:jfactivist.typepad.com" into your search bar (without the quotes) it should pop right up in your results.

Thanks for that Ordinary Girl..........

Exactly. You made a good choice here.
I speak from experience when I tell you, some things are not DIY, and this is one of them.
I've gotten myself into more trouble in the past by trying to DIM, and I've learned it isn't worth it.
Best of Luck
Nancy

With hold the taxes up front? I don't know....
 

My check arrived so fast, I honestly did not know they could with hold taxes until later. The whole thing was a mess. Don't get me wrong, I was pleased to get the check, but when my tax friend told me I had to pay those taxes from withholding, not by just sending the IRS a check for whatever I owed them.......it was ... uh.....March??? So I had to increase my with holding about $500 a month for the rest of the year. That was after I had put the SSDI check into a CD for a year. All that good news at one time... :)

IF you can contact SSDI and ask them to withhold before they send you the check, I think it would work better for you...... I don't know, each of us have different priorities. A friend of mine is losing his home and he wants every penny he can get asap. He said he would worry about taxes next year.

I don't know if this helps you, but ... to my knowledge and I learned this after I had my check, I think they can withhold from it. BUT you have to tell them ahead of time. I hope I said that right. I am having reactions to some meds right now... high blood pressure meds changed twice now, Perepheral Neuropothy meds, Restless Legs Syndrome meds and Fibromyalgia are all .......... out of whack. Take care, Dave

hello all,
I am pretty sure they must take it off up front in most cases.

I have heard so much about something called "Tax free high interest savings" account. Does anyone have any more information to share about this?

I got one set up for my RRSP this year but I do not know all the ins and out of how it works for me.