Gardberg & Kemmerly, P.C. Attorneys at Law




If you have filed a claim for Disability Insurance Benefits (DIB) or Supplemental Security Income (SSI), the earnings you report on your tax return can and will affect your claim for benefits. If you have worked and earned income, it is important to file your taxes and report that income accordingly. However, if you have not worked or earned very little income, be careful what you report on your tax return as your past due benefits will be affected.

The EIC or Earned Income Credit is a benefit for working people who have low to moderate income. It reduces the amount of tax you owe and may also give you a refund. However, you must report employment income and have a qualifying child in order to qualify for the credit. Sometimes an individual with little to no income will claim additional self-employment in order to have adequate employment income and claim the EIC. Many times the individual did not perform any self-employment income, but was lured into documenting such work with the option of receiving $2,000.00 to $8,000.00 or more in tax refunds. For someone who is disabled and without income, this is quite enticing and seems like a legitimate source of income while in financial need.

Do not be lured into falsely filing self-employment for large income tax returns, as this can cause you to lose all disability benefits for that tax year! Additionally, filing an erroneous EIC credit can cause you to be ineligible to file that credit again for 2 or 10 years, if it is determined to be fraudulent or erroneous. While the Social Security Administration may not report your return, they can make you amend your onset date for disability. Amending your onset date will cause you to lose any disability benefits, both monetary and insurance, for those months.

A prime example we see is an individual has 2 dependent children and no income. She may braid hair for family members here and there for side money. She goes to a "pop up" tax preparation office that opens January 1st and many of these places close May 1st, leaving their clients with no recourse or place to get information from once their return comes into question with the judge. The tax preparer advises the individual that even though she only actually made $2,000.00 all year, she can claim almost $15,000.00 in self-employment and with 2 dependents; her EIC would yield her a tax return of over $5,000.00. However, for this same year she has claimed she was disabled and unable to work, which is true. She has been unable to be employed in the work force since the beginning of the year in her regular job as a CNA (Certified Nursing Assistant). She has continued to get medical treatment through clinics, as she has no insurance, and her physician even has stated she is unemployable due to her disabilities. Unfortunately, she has now claimed, per her tax return, that she not only worked but that she was performing substantial gainful work activity for this entire year. The Judge will request a copy of her tax return, and if she is granted any disability at all, it will be after that tax year. Many times the Judge may ask the individual about the work during a hearing and typically testimony is given that work was not actually performed. The testimony and false tax return now affects the credibility of the claimant not only in court, but also in regards to all their subjective allegations to any doctor or hospital.

Even if a Claimant was to receive only SSI payments of $733.00 a month for the 2016 year, this would equal $8,796.00 in back benefits, not counting the fact they may qualify for Medicaid insurance benefits. So while the $5,000.00 tax return seemed to be a good idea, the individual has actually lost money and benefits that may have covered doctors or hospitalization bills she incurred during the year.

To some reading this it may seem unrealistic that someone would actually file a false tax return, however, people do. Not only are our clients financially destitute in many cases, but some with mental and intellectual disabilities are preyed upon by tax preparers looking to get a commission or interest from the tax refund. Especially if the individual takes a rapid refund loan and pays tax preparation fees.

If you or someone you know is filing for disability, please read and forward this article immediately. As we approach the tax season on January 1st, it is important that all individuals understand and take into consideration the information they file with the IRS. Individuals should consult with their tax preparer regarding a claim for disability benefits, and if you need additional tax advice, contact a qualified tax attorney. Also, keep a copy of your tax return, as this may be requested by the Social Security Administration.

We are not tax attorneys and recommend you consult with a local tax attorney if you need further guidance in processing a tax return. If you are disabled and in need of assistance navigating the disability process, call one of the experienced disability attorneys at Gardberg & Kemmerly, P.C. today at 251-343-1111 for a free consultation. Gardberg & Kemmerly specializes in helping the injured and disabled.

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