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Can You File Taxes On SSI Disability

When you work as an independent contractor for a business, your employer withholds taxes from your payment. Each year, you receive a W-2 form detailing your taxable income and the taxes you paid for the year. Once your taxes are filed, you can determine how much money you owe or how much money the government owes you. Indeed, it is via these taxes that disability benefits are made possible.

This is a rather basic procedure. However, it is not so straightforward for Social Security benefits users. Payments for disability are not necessarily taxable. Keep reading to find out everything you need to know about filing taxes if you’re on Supplemental Security Income. 

What Is Supplemental Security Income?

Supplemental Security Income (SSI) is a government program supported by general revenues in the United States Treasury. Although the Social Security Administration of the United States (SSA) administers the program, SSI is not funded through Social Security taxes. SSI assists disabled individuals and children with low income and few resources.

Filing Taxes On SSI Disability

Almost all sources of income are taxed by the Internal Revenue Service (IRS). Gross taxable income is defined in Chapter 26 of the United States Code Section 61 as "all income from whatever source obtained," which covers a lot of material.

The Code lists numerous other types of income as examples. However, Supplemental Security Income (SSI) is not included — implying that SSI is not taxed.

However, some misunderstanding exists since the Social Security Administration — not the IRS — requires income reporting for the purpose of determining eligibility for SSI. 

What Is Tax Credit And How Can It Be Applied To You?

A tax credit is a monetary sum taxpayers can deduct directly from their tax liability. In contrast to deductions, which reduce taxable income, tax credits reduce the amount of tax owing. The value of a tax credit is determined by its category. Certain types of tax credits are only available to individuals or businesses in particular localities, categories, or industries.

Understanding The Earned Income Tax Credit (EITC) 

The EITC is a tax credit for low to medium workers and families. If you are eligible, you may utilize the credit to offset your tax liability — and perhaps boost your refund. The amount of EITC you may qualify for is typically determined by your earning income and the number of eligible children you have.

Am I Qualified For The EITC If I Receive Social Security Or SSI?

Yes, assuming you fulfill the EITC's eligibility requirements. Receiving Social Security or SSI has no bearing on your EITC eligibility.

Understanding The Child Tax Credit

The CTC is a tax credit that will be enhanced in March 2021 to assist families raising children. You may collect the CTC for any qualified child regardless of whether you typically file a federal income tax return. You can get up to $3,600 for each eligible child under the age of 6 and up to $3,000 for each qualified child between the ages of 6 and 17. These are the ages of the participants as of December 31, 2021.

Am I Eligible For The CTC If I Receive SSI?

Yes, assuming you match the CTC's eligibility requirements. The IRS allows you to claim this credit for each eligible child, even if you receive Social Security or SSI and do not ordinarily submit a tax return. 

Will My SSI Payments Be Reduced If I Get Monthly CTC Payments In Advance Or If I Claim Any CTC On My Tax Return?

Monthly CTC payments made in advance and any CTC claimed on your 2021 tax return will have no effect on your Social Security benefits.

If you receive SSI, the CTC will be disregarded (and any advance monthly payments you may have received during 2021) for determining your SSI eligibility and monthly SSI payment amount for 12 months after you receive it. Keep track of any extra monthly CTC payments you receive. This information is available through the IRS Child Tax Credit Update Portal.

Conclusion

Supplemental Security Income provides a crucial economic lifeline to those who cannot support themselves due to illness or injury. In this article, we discussed whether those receiving SSI benefits are liable to file taxes on these payments. In short, the answer is no. 

If you’re interested in learning more about developmental disabilities, check out Disability Help's article covering the 5 developmental disabilities. 

Chloe Powers
Chloe works with policymakers on behalf of Disability Help to support their work at a strategic level, ensuring the conditions are in place for creative individuals and organizations to grow, reach their potential and effect relevant, sustainable change.
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