Back Pay And Paying Taxes

[Ssgtdotcom]

I have received over $40k in back pay for my self and my dependents. took 38 months to win. anyway my question is this: do I have to pay income tax on the back pay since it amounts to more than $32k? if so, how do they expect us to pay all the bills that accrued while waiting on a decision? so I will have to not spend almost half of the money just to pay them right back. that is not fair.

[Chuck75]

I'm afraid that you will need to find an expert to answer this one!. I don't think the government or the IRS has "reasonable" in its dictionary. And I don't want to think about state income tax either.

I have received over $40k in back pay for my self and my dependents. took 38 months to win. anyway my question is this: do I have to pay income tax on the back pay since it amounts to more than $32k? if so, how do they expect us to pay all the bills that accrued while waiting on a decision? so I will have to not spend almost half of the money just to pay them right back. that is not fair.

[Rich T]

I assume you mean for a s/c claim. If so, you don't have to say one word about you VA income to SSA. Last year I got a letter from IRS asking me to explain how I could pay over $26,000 in interest on both homes and not file. I was on the phone with an investigator from Dallas for about an hour. I told her I get SSDI and VA compensation and since my SSDI is less than $32,000 I don't have to tell them what my VA is. She eventually closed the file, and sent me a letter saying case closed.

[Guest terrysturgis]

I received $40,000.00 retro last year. Veterans Compensation Disability pay is not taxable. I did ammend my state tax returns for three years to get the homestead tax exemption. You need to call whoever does your taxes to confirm that information for your situation. Everyone's tax burden is different, for instance my wife works. It cost me $200.00 to get all that done by a CPA. Money well spent IMO.

By the way CONGRATS for the win. Take care. Terry Sturgis

[LarryJ]

To answer your question, regardless of your other income or whatever, VA compensation is NOT taxable, not in your state, county, city or especially to the IRS. It does not matter what your spouse or kids make, or you make, for that matter. It does not have anything to do with SSDI, either.

It just ain't taxable under any situation.

Simple.

[Ssgtdotcom]

I am sorry I should have been clear on which backpay I received. it is for SSDI. I just don't understand why I should have to turn right around and give it back. why not just take taxes out before retro pay?

[Rich T]

I was just looking at the 1040A worksheet for SS income. Page 29 line 2 says to cut the amount from the SSA 1099 in half, then add that to all the other incomes from lines 7 (W2) to 13 (interests, dividents, gains, etc). So unless you, or your wife was working then forget it. Besides you got it in 2007, so filing right now is for 2006.