Back Pay is unofficial yet commonly used term for Social Security disability benefits that a claimant would have collected had the Social Security Administration (SSA) approved his or her claim right away. The claimant will collect his or her accumulated Back Pay once he or she gets approved for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) benefits.
Before a claimant secures an SSI or SSDI approval, his or her claim may be rejected one or multiple times. As such, the Social Security application process is often long and it takes months or even years for a claim to be approved. The SSA refers to the Back Pay that has accumulated during the approval process as past-due benefits.
How Is Back Pay Calculated?
The SSA usually calculates Back Pay by considering the date the claimant made a disability claim in relation to the established onset date, which is the date that the claimant’s disabling condition started. An administrative law judge (ALJ) or a Disability Determination Services (DDS) examiner determines the established onset date by carefully reviewing the claimant’s available medical records and reports.
A social security attorney can help a claimant who developed a qualifying disabling condition months before the application date contest the established onset date. The objective here will be to ensure the onset date matches when the claimant became disabled and incapable of performing substantial gainful activity.
How Is Back Pay Distributed?
The distribution method adopted will be based on whether a claimant got accepted for SSI benefits, SSDI benefits, or both. SSI benefits accumulate from the date the claimant submitted his or her application. SSDI benefits can accumulate from the first application date or one year before the application date, minus a five-month waiting period. The SSI Back Pay is disbursed gradually, while the SSDI one is disbursed in a single large payment. The explanation for the SSI Back Pay delay is that single large payments would overstretch SSI’s financial resources.
Is Back Pay Taxable?
A percentage of disability Back Pay may be subject to taxation if the recipient’s overall income surpasses a specific threshold. Luckily, the IRS allows lump-sum election that involves refiguring Back Pay that accumulated in a previous year into the income of that year for tax reasons. That way, recipients can reduce the odds of a lump-sum payment thrusting them over the set threshold.
