Re: LTD insurance and SSDI back pay issuses help???

"ocalagal" <ocalagal@xxxxxxxxx> wrote in message
news:27eb2695-f8e6-4fed-85de-7a4a2735c1ff@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I received a fully favorable decision from SSDI back to 9/6/2006 in
Feb of this year. While waiting for this decision, I received a
monthly income from a LTD insurance policy which had been paid by my
employer. I was fully taxed for total amount paid for these years
and the IRS is actually requesting that I pay them over $6,000.00
including penalties for the 2007 tax year. Actually, after I was
awarded the SSDI back pay from 3/2007-6/2009 I was immediately
responsible and DID pay the majority of it back to the LTD insurance
company. Here are the issues that I am questioning for the tax years
of 2007 and 2008.

1.) Am I still taxed the full amount paid by the LTD insurance company
for those Tax years, even though I paid the entire amount back to the
company once I received the SSDI back pay?

------
Yes. However, in the year you pay it back, you get a deduction or credit.
See "claim-of-right" (since the amount was over $3,000.00). You could
argue to the IRS that you didn't have a right to keep the payment so it
shouldn't have been income to begin with. Such an argument will depend on
the wording of the actual insurance contract.
------

2.) Am I responsible to pay Taxes on the back pay amount that I
received this year?

------
Yes, assuming it's not relatd to a physical personal injury.
------

I am confused. The IRS is currently pursuing me for over $6,000.00
that I do not have because I paid over $60,000.00 back to the LTD
company who reported that they paid me the $60,000.00 for those years
when in actuality it was SSDI benefits? uggggg. I don?t know what to
do?


.

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