If you or someone you know receives Social Security Disability Income (SSDI), you might have come across the term “back pay.” While “back pay” isn’t the official term used by the Social Security Administration (SSA)—it refers to “past-due benefits”—it’s commonly used in conversations. These past-due benefits apply to the time you were medically eligible for disability payments but were waiting for approval.
Navigating back pay can be confusing, especially since the disability claim process often takes time. If an application is denied and an appeal is submitted, it can extend the timeline even further. Thankfully, the SSA ensures you receive the benefits you deserve, although understanding how back pay works can be complex.
Understanding SSDI Back Pay
Back payments can date back to your original application. For example, let’s consider a scenario described by AARP. Suppose you had arthritis that worsened to the point that you could no longer work as of October 18, 2020. You applied for SSDI on November 1, 2020, but were denied. After appealing the decision, you had a hearing with an administrative law judge.
During the hearing, you presented evidence to support your case. If the judge rules in your favor, your disability would be considered effective from October 2020. The SSA then calculates your SSDI benefits based on your earnings history. Let’s say this amount is $1,200 per month. However, by February 2022, you still haven’t received any payments since October 2020.
This is where back pay comes into play. By this point, 15 months have passed since your disability onset date. SSDI benefits have a mandatory five-month waiting period, meaning benefits start in the sixth full month after your onset date. Consequently, you would be entitled to 10 months of back pay.
How Does the SSA Handle Back Pay?
Once your claim is approved, the SSA typically pays your past-due SSDI benefits in a lump sum within 60 days. If you hired legal representation for your case, the SSA would deduct their fees from your back pay. It’s essential that any fee agreement is approved by the SSA beforehand. Generally, legal fees are capped at 25% of your back pay or $6,000, whichever is lower. For instance, if your total back pay amounts to $12,000, your lawyer would receive $3,000 from that sum.
Can You Only Receive Back Pay from SSDI?
Not at all! You can also receive back pay from Supplemental Security Income (SSI). This program provides assistance to low-income individuals who meet specific criteria. However, the rules regarding back pay for SSI differ from those for SSDI.
For SSI, the payment start date is linked to your application date, rather than your onset date like with SSDI. Another key difference is that SSI does not have a waiting period, in contrast to SSDI’s five-month waiting period. If your total back pay exceeds the SSI program’s maximum monthly benefit (which was $841 in 2022), you would receive it in three installments spaced six months apart.
What Is the Maximum Amount You Can Receive from SSDI or SSI Back Pay?
It’s crucial to understand that there is no maximum limit on back pay for either SSDI or SSI, making these opportunities particularly beneficial.
How Does Back Pay Affect Your Taxes?
Keep in mind that a portion of Social Security benefits can be taxable. If your overall income exceeds a certain threshold, some of your back pay may be subject to taxes. The IRS allows individuals to minimize the risk of exceeding this limit by permitting a lump-sum election, which lets you refigure back pay from the previous year to be counted as income for that year.
Examples of Back Pay
When you receive back pay, you will have a “date of entitlement,” which indicates when the SSA starts owing you benefits. For SSDI, back pay is provided five months after your disability onset date. As illustrated earlier, this means that your back pay calculations will vary depending on whether you are receiving SSDI or SSI.
