Social security back pay

1 : I applied for SSDI about 5 years ago. During the 5 years, I had no income. Actually I was going into debt further and further every year. About six months ago I was 

2 : I am a single mother so I claim head of household and I have one child. I own a home. My income each month is about $3300, the interest on my mortgage is about 14,000. I was awarded almost 100k in back pay. 

Since the pay was for 3 prior years, can I go back and amend previous tax returns to show that money as income for those years? Or can I income average? Please excuse my ignorance, I know enough to be dangerous.

3 : awarded SSDI. I was also awarded three years back pay. It is quite a chunk of money and I am worried about having to pay taxes on this much money. I did read on the social security website that if you made more than $25,000 in Social Security in a year then you were required to pay taxes. 

Also much of this money is going to be used to pay off the large debts incurred during those 3 years that I had no income. Can you help ??

Answer :

1 : As single, as long as your MAGI (AGI+1/2 of your SSDI annual benefits +any tax exempt interest and other exclusions from income.), then 50 % of your annual SSDI can be included in your AGI for tax;however, as a HOH, UNLESS your AGI exceeds a certain level , then you do not need to pay tax on your SSDI. SO it depends on the amount of your taxable income reported on line 43 of 1040

2 : your back pay is pay received in the prior 3 tax years for actual or deemed employment in your earlier tax years. For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. As long as they are wages , then you need to report all back pay. However, the 3 prior tax years for which back pay is credited as wages for social security purposes is different if it is awarded under a statute; the IRS and the SSA consider back pay awards to be wages. However, for income tax purposes, the IRS treats all back pay as wages in the year paid. Your former employer(s) should use Form W-2 to report back pay as wages in the year they actually pay you, the former employee.

3 : UNLESS those large debts are your personal debts, then you can deduct those debts as your business debts, as non-personal debts.

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