In 2011, I went on short term disability provided by my employer. In December 2012, I transitioned to Long Term Disability. I remained on Long Term Disability until November of 2012. The wages I received from this LTD plan were received as non-taxable pensions, which I did not have to pay taxes on. While on LTD, I was forced to apply for Social Security Disability. Originally, SSD denied the application, but an appeal was made. The appeal was granted in September of 2013. During this process we had to forfeit $4,500 of our award to the attorneys appointed by the LTD carrier. The lump sum that was granted from SSD was backdated to December of 2011. The total award was for around $38,000.
When I received the award for SSD, I had to reimburse the LTD carrier (essentially the whole award minus the $4,500 attorney fee).
When using TurboTax to complete our taxes and entering in SSA-1099, it shows that around $12,000 is owed in taxes.
In February of 2014, I was told by SSD we had to apply for dependent benefits which were awarded shortly after back-dated to 2011 as well.
I am confused on how this tax situation works.
- Should the attorney who completed the SSD application chosen the option to have taxes withheld and is this an option on the application?
- Why did Social Security not give us the option to withhold taxes if taxes were due?
- Why are taxes due if we had to repay all the received money?
- Why are taxes due on the full award including the money from the years 2011 and 2012 in 2013 if the SSD process is long and drawn out?
- Are we going to owe taxes in 2015 for 2014 SSD awards for the dependents dating back to 2011?
- How do we get SSD to withhold income tax if it is taxable?
I feel that if SSD didn't take so long to decide and payout the award, then the lump sum received in 2013 wouldn't have been so high requiring it to be
Any help would be appreciated.