For the millions of Americans relying on an average $1,000 monthly SSDI benefit, this extra money can really make a difference.
Belleville, IL (Vocus) September 24, 2008
Taxpayers have just a few weeks to file their 2007 tax return before the Oct. 15 late filing extension, according to Allsup, a leading provider of Social Security disability, financial and healthcare-related services to people with disabilities. Meeting this deadline is all the more important for the 8.5 million working-age adults who rely on Social Security Disability Insurance (SSDI) as a primary source of income or are awaiting a decision on their SSDI benefits.
"Most people think you shouldn't file a tax return if you don't owe taxes, and many people on SSDI don't file a return for this reason. But they may be missing out on money owed them because the only way they can collect this money is by filing a tax return," said Paul Gada, Allsup's personal financial planning director and a tax attorney. "For the millions of Americans relying on an average $1,000 monthly SSDI benefit, this extra money can really make a difference."
For the 2007 tax year, two of the potentially largest benefits available to SSDI recipients filing tax returns are the one-time tax rebate and the earned income tax credit. Additionally, filing a tax return, even when taxes are not owed, may help individuals with low income qualify for programs to lower their Medicare costs, according to Gada.
Getting Your Tax Rebate:
Under the one-time tax rebate program, a part of the economic stimulus law passed earlier this year, rebates are available to individuals with at least $3,000 in qualifying income. Qualifying income includes income from a job, self-employment, Social Security benefits, such as SSDI, and veterans-disability payments. The rebate is $300 for qualifying single individuals receiving just Social Security or veterans-disability benefits and $600 for married couples.
The rebate amount can be even more for a couple where one individual also is working (up to a $1,200 rebate) or where a single person with a disability had earned other income (up to a $600 rebate). Also, anyone getting a rebate may be eligible to get an extra $300 for each of their children under 17.
"People who don't owe taxes may be uncomfortable filing or paying someone to complete their return. But the only information that matters is what's needed to issue your rebate, like your name, Social Security number, mailing address and 2007 income," explained Gada, noting that Allsup's Financial Matters web site includes Resources for the 2008 Tax Rebate, linking to IRS tax forms needed for the rebate.
Claiming the Earned Income Tax Credit:
The earned income tax credit (EITC) is a refundable credit. This means that if the credit amount is higher than an individual's tax bill, she can get the unused portion of the credit back as part of a tax refund. To be eligible, a taxpayer or spouse had to have been employed for at least part of 2007, earned below a threshold of $12,590 to $39,783 (depending upon filing status and the number of children claimed), and had investment income of $2,900 or less. Individuals qualifying for the EITC can realize a credit ranging from a few dollars to more than $4,700, depending on income and family size. As a result, qualifying taxpayers that already filed their 2007 tax return but did not claim the EITC may want to file an amended return so that they can claim the credit.
"There is a very high likelihood of qualifying for the earned income tax credit if SSDI benefits are your primary source of income and you receive about $1,000 a month," said Gada. "Unfortunately, the IRS estimates that about one in four EITC-eligible taxpayers still failed to claim the credit last year."
Lowering Medicare Costs:
Reducing Medicare costs is another reason for individuals with disabilities to file a tax return even if they do not owe any taxes.
A person with long-term disabilities becomes eligible for Medicare 24 months after his date of entitlement to cash benefits, as determined by the Social Security Administration. For those who qualify, Medicare Part A (hospital coverage) is free. The cost of Medicare Part B (outpatient medical coverage) premiums is tied to the person's annual income. In 2008, the monthly cost is $96.40 for single taxpayers with income of $82,000 or less ($164,000 if married and filing jointly).
However, $96.40 per month may still be unaffordable for individuals with a low income. Four Medicare savings programs have been established to help these individuals pay for coverage. Each of the programs has its own monthly income limit, ranging from $851 to $1,702 for an individual ($1,141 to $2,282 for a couple), and requires that recipients have limited personal assets to be eligible.
"Qualifying for these programs requires that you are able to substantiate your income limitations. A filed tax return is among the best evidence you can provide because it clearly shows your income. This speeds your Medicare savings application process, helping you save even more," said Gada.
People can apply for any of the Medicare Savings Programs through their county Department of Social Services. Allsup provides an interactive map of county contact information on its Web site.
Allsup, Belleville, Ill., is a leading nationwide provider of financial and healthcare related services to people with disabilities. Founded in 1984, Allsup has helped more than 100,000 people receive their entitled Social Security Disability Insurance and Medicare benefits. Allsup employs more than 500 professionals who deliver services directly to consumers and their families, or through their employers and long-term disability insurance carriers.
For more information, visit Allsup.com.
The information provided is not intended as a substitute for legal or other professional services. Legal or other expert assistance should be sought before making any decision that may affect your situation.