Supplemental Security Income (SSI) is a program by the Social Security Administration for seniors, people with disabilities, or the blind. The program is designed to help those in dire need to meet their financial requirements. However, the beneficiaries must be people with few assets and low income. The administration reassesses beneficiaries’ financial eligibility monthly to ensure they still qualify for benefits. If you exceed the limits set, you could lose part of the SSI benefits, or all the benefits for that month.
Thus, receiving money, especially a substantial amount, can affect your eligibility for SSI. This includes tax refunds, especially state tax refunds. A skilled social security disability lawyer can help you determine your eligibility for SSI if you are expecting tax refunds or have already received some money. They can also discuss your options and help you through all legal processes as you claim your rightful benefits.
Circumstances Under Which a Tax Refund Counts as Income
The Social Security Administration is very particular about who should receive Supplemental Security Income, ensuring that only people with actual needs receive it. You are required to report every income you receive so that SSA can determine your eligibility for benefits. Generally, tax refunds are not considered income, and many people may fail to report them as expected, leading to problems with the SSA, including denied benefit applications. It helps to know when your tax refunds may be treated as income so you can report them on time. If so, your tax refund counts as income, which will affect the amount of SSI you receive.
To receive SSI, you must be a low-income earner or have only a few assets. You must demonstrate an inability to cater to your immediate needs. SSI is designed to help specific low-income earners meet their financial needs. The SSA has an income limit beyond which you are ineligible for SSI. This limit changes each year to reflect changes in the cost of living. For example, the limit was set at $943 monthly for individuals and $1,415 for couples. If, in one or several months, your income increases more than the set amount, you are eligible for less or zero SSI, depending on your exact monthly income.
However, not every income you receive affects your eligibility for SSI. The income that affects your eligibility should meet the SSA's criteria for countable income. According to SSA, the first $65 you earn in a month and a half of your wages for that month are exempt from the income limit. There are other exemptions to consider, as well as state supplements, which may affect your income limit. A competent social security disability lawyer can provide a comprehensive guide to help determine your eligibility for SSI.
When it comes to tax refunds, they may or may not affect your eligibility for SSI. Their impact on your income limit depends on the amount and type of tax refund. Generally, federal and state tax refunds do not affect your income limit for SSI purposes in the month they are received. However, if your tax refunds are retained, they could be substantial enough to count as income. This may push you over the income limit, triggering loss of benefits.
In most cases, this happens to state tax refunds. Federal tax refunds are exempt for up to 12 months, and so, may not really affect your eligibility for SSI. You must carefully manage your state tax refunds to stay below the required asset limit to qualify for SSI. Although you do not have to report tax refunds as income in the month you receive them, it is advisable to notify the SSA once you receive a refund, especially if it will put you above the income limit.
How a Tax Refund Affects SSI Income Limit
Generally, eligibility for SSI is determined by the amount of countable resources you have in a month. The general rule is that your countable resources must not exceed $ 2,000 for an individual and $ 3,000 for a couple. If you have more of that amount in resources, you do not qualify for Supplemental Security Income. The Social Security Administration tracks down your resources every month to determine your eligibility, based on what you receive in that month. SSA considers what you have as of the first day of the month.
For SSI purposes, your income resources include personal property and even the money in your bank account. However, the following are exempted from consideration:
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Your home or residence
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At least one of your vehicles
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Most of your household goods, except for luxury items
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Burial plots
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Your life insurance policy has any cash value up to $1500
If you receive a federal tax refund, it does not count towards this resource limit. However, the exemption is only for the first 12 months after the month you receive the refunds. This exemption applies to the refunds and advanced tax credits, such as the following:
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Child tax credit
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Tax credit on earned income
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Marketplace health insurance premium tax credit
If you receive a substantial federal tax refund and can spend it within 12 months, you could continue being eligible for SSI benefits. However, if after paying the refund you still have so much remaining that it increases your income limit, you will lose the SSI benefits.
On the other hand, state tax refunds are treated differently when it comes to SSI benefits. Unlike federal tax refunds, state tax refunds are not exempt from your income limit. However, this does not necessarily mean that any state tax refund you receive will affect your eligibility for SSI benefits. While your tax refunds may not necessarily affect your eligibility, holding onto the funds can.
The rule that you should not have more than the income limit in a month to qualify for SSI benefits will still apply. If you hold onto the tax refunds, and in one or more months your income limit increases beyond the limit, you will be ineligible for SSI benefits for those months. This will continue until your resources go below the allowed limit.
Thus, if you receive your state tax refunds and the amount puts you above the income limit for SSI benefits, you must spend the money within that month. If you still have more left at the beginning of the following month, you could lose your benefits in that month altogether. A skilled attorney will advise you to pay for some of your recurring expenses, like rent, or you can send the money to exempt assets like a computer or food staples.
Filing Taxes as an SSI Recipient
As a recipient of SSI benefits, you are exempt from paying tax, but only if the benefits are your only source of income. Generally, SSI recipients are tax-exempt, meaning that you are not expected to file federal tax returns. However, if you have other income sources, you may have to file a tax return. Additionally, there are benefits you enjoy from filing tax returns.
Even though SSI benefits are not taxable income, other Social Security Benefits could be. For example, disability insurance benefits and retirement benefits are taxable. Your wages are also taxable. If your income meets the taxable income limit, you must file tax returns.
In this case, you must file your tax returns every year that your income meets the taxable income limit. Remember that the taxable income threshold changes every year. Thus, find out the limit first to see whether you are required to file tax returns. You must do this every year to ensure compliance.
For example, the 2023 taxable income for an individual was $13,850, or $15,700 for seniors. The threshold was almost double that amount for couples. If you have a job or business that earns you a substantial amount, you must file tax returns if, after receiving SSI benefits, your income for that year exceeds the taxable income limit.
Additionally, SSI benefits recipients who have marketplace health insurance and received a premium tax credit or a monthly premium discount must file federal tax returns. Your skilled social security disability lawyer should be able to help you determine your actual situation to ensure compliance.
Before filing for tax returns, it helps to understand the benefits. Even if you are not required to file tax returns as an SSI benefits recipient, there are some benefits you can derive from it. For example, if you have a part-time job and your employer withholds taxes from your wages, you can file for a tax refund. A tax refund will give you financial relief that can help you in so many ways, including paying a debt, covering essential expenses, or even boosting your savings. If you have a business, you can reinvest the money to improve your competitiveness in the market.
Additionally, there are tax credits you could receive, which are usually refundable, even if you are not paying taxes on your SSI benefits. However, you can only get tax credits if you file a tax return on your income. If you are a SSI recipient and have dependents, you may qualify for the following tax credits:
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Earned income, from which you can get a substantial amount to boost your income
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Child tax credit, from which you could receive $1600 for each of your children aged 17 years or younger
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Child and dependent care, for any dependent care service you paid for, so that you or your partner can earn a living or find employment
Additionally, if you are already receiving disability pension or any other form of disability income from your former employer, you could be eligible for a tax credit for the disabled and elderly.
When you claim any of these tax credits, the money you receive is categorized under federal tax refunds. This means that you have up to 12 months to spend it, without it affecting your income limit for SSI purposes. It will increase your income limit and affect your eligibility for SSI benefits if you have some money left after twelve months of receiving the tax credit.
How a Social Security Disability Lawyer Can Help
Social security disability lawyers are very knowledgeable about Social Security Benefits matters. They know the types of benefits available, eligibility criteria, and what you can do to increase your chances of receiving benefits. They also know the dos and don'ts for those applying for benefits and those already receiving them, to improve their chances of benefiting from the various Social Security benefit programs. Here are some of the reasons you should consult an attorney before applying for SSI benefits:
For Help with the initial Application
Applications for SSI benefits are not as easy as you would expect. You must carefully and accurately fill in the required information for the SSA to consider your application for benefits. An attorney will guide you through the application process to prevent early denials. They will organize and submit the required medical records, doctor reports, and any other documentation that will support your claim.
Communicating with the SSA
An attorney communicates with the SSA on your behalf. They manage all correspondence and respond to any requests you receive, such as a request for additional information.
Helps you Remain Compliant
An attorney will ensure you understand all the requirements by SSA regarding SSI benefits. This way, you remain compliant and continue receiving the benefits you should. They will help you avoid mistakes or overlook issues that could affect your eligibility.
Find a Competent Social Security Disability Lawyer Near Me
If you receive SSI benefits or are applying for SSI benefits in California, you need all the information you can get to remain eligible. SSA determines your eligibility every month, and can deny benefits if you fail to meet the set criteria. If you have received or are expecting a tax refund, a skilled attorney can help you determine how it will affect your eligibility for SSI benefits.
At Leland Law, we can help you if you want to remain eligible for SSI benefits after receiving tax refunds. We can also help you with ways to benefit more, especially with filing tax returns. Call us at 866-449-6476 to learn more about your situation and our services.
