Tax Season 2014: Filing SSDI plus Earned Income and How I Totally Screwed Up 2013

Like many of you, I have Social Security Disability (SSDI) as my main source of income. I started drawing it in August of 2009, and in February of 2010, I went to the IRS site to file my federal EZ tax return, the form I’d always used each year of my working life.

My only source of income was SSDI and I had no taxes taken out. After plunking in the numbers, a box popped up stating that I had no tax withheld and owed none, so I need not file a tax return—and it booted me off the site.

Pleased by the good news and not a little bewildered, I went to the SSA.gov site and read that people on SSDI can make up to $25,000 per year and not owe federal tax. Confident that the IRS no longer wanted to hear from me, I did not file a tax return from that point on. The T-men had as much as told me I was off the grid for good.

My interpretation of these facts was a bit bone-headed, however, as I was to find out when my dream apartment came available in December of 2014 and the application process began to approve me for tenancy.

Two days before I was to move in to my new apartment, my application was suddenly denied. I indicated that I had some earned income in 2013, but hadn’t filed a tax return. They needed to verify the earned income and couldn’t do so without a tax document. I was stunned and panicked. It was December 29th, I was still living in my mother’s drafty old Victorian house; my upstairs renter took a powder late one night in the middle of the month, stiffing me for the December rent—which I needed to pay the utilities. The movers were set to come on December 31st, New Year’s Eve day. I had nowhere else to go. Having exhausted all the low-income senior communities in my tiny town of Tecumseh (there are only two, and the other one had a waiting list of 25 people), I would have to look in the neighboring town of Adrian, at the notorious senior high-rises or, worse still, section 8 housing where unattended little children were known to ride their bikes up and down the halls of the elderly and disabled wing, and where, as the gossip went, there had been a recent infestation of bed bugs.

What was I to do? My good friend, Barb, who has helped me out of scrapes in the recent past, suggested I see my mother’s tax accountant immediately. It wasn’t tax season yet, so he probably wasn’t busy, she said. I called him the next day, and in our meeting, I learned some important things, one of which was: The law states that we must report earned income over $400. My accountant drew up a late 2013 return with my SSDI income and plunked in the numbers I gave him for my earned income, which was well over $400. I wound up owing the feds $122 (we can, in fact, owe federal tax even if we make under $25,000), but I qualified for a refund from the state for $150 (it was the last year I could get a property tax credit in Michigan). Fortunately for me, it was a wash. I picked up the paperwork on December 31st, two days after my denial, dashed over to the apartment complex and put a copy of the return in the manager’s mailbox. Two days later, my application was approved. I moved in on January 5, 2015. It’s amazing how fast a disabled MS patient can move when there is only one apartment in one particular senior community she’s been dreaming about for months. On the sound advice of a good friend—and a really nice and helpful accountant—I had gotten the paperwork I needed within 48 hours. I still can’t believe I did that. My new accountant is likely still shaking his head over the fact that I didn’t file taxes last year. His last words to me were: I’ll see you back here in a couple of months to do your 2014 taxes, to which I replied with a sheepish bow and “okay” as I headed out the door. I still feel like a complete idiot.

I offer you this story as a cautionary tale. Think of me as the poster child for tax ignorance and its consequences. Thank goodness it wasn’t worse. I’ve been told we can file a late return as far back as three years without being fined and penalized. My advice is don’t go by what people tell you. Ask the professionals. My friend, Barb, told me that we can file late returns from three years’ past, but my accountant also confirmed it. Cross-referencing is always a good idea. I wish I’d remember to do it more often.

So, when you file your 2014 taxes this year, will you be preparing them yourself, or take them to a professional? If you entertain the slightest doubt that you might be as bone-headed as I was, might I suggest you let a professional handle it? Our dubious brain cells might not be comprehending information like in the pre-MS days, and you don’t want to become conspicuous in all the wrong ways where the IRS is concerned. Whenever you read something on the SSA.gov site about disability, work, and paying tax, call them to clarify what you’ve read. I got into this mess in the first place because I didn’t do that.

For those of you that can’t afford to pay an accountant: If you make less than $53,000 per year, the IRS has a program called The Volunteer Income Tax Assistance (VITA) for people with disabilities and the elderly. For more information, go to the IRS page at: http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

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