Do you or someone you know receive Social Security Disability Income (SSDI)? If you are familiar with SSDI, then you probably heard about back pay. Back pay is the informal term used to refer to“past-due benefits” that people receive from the Social Security Administration (SSA). These benefits indicate a timeframe when you were qualified to get disability benefits, but you were waiting for the program’s approval.
Back pay is pretty common since it can take a while to get approved for a disability claim. Furthermore, if the program refuses the applicant, then it can take even longer. That’s because the applicant has the option of submitting an appeal. Fortunately, you will receive your benefits eventually–the SSA makes sure of that! However, it might be a little complicated to know how back pay works.
Making Sense of Back Pay
The day you originally submitted your application to the program can be the start date of when you get back pay. To understand more, let’s look through AARP’s example. Imagine you have arthritis that is gradually worsening with time, resulting in you being unable to work anymore starting from November 18th, 2020. After that, you applied for SSDI benefits on December 1st, 2020. Unfortunately, the program denied your application. Soon after, you send in an appeal and receive a hearing date with an administrative law judge.
During the hearing, you can try to prove to the judge that you are entitled to these benefits and work on getting them on your side. If the judge rules in your favor, then the program defines your disability starting from November 2020. It is up to the SSA to determine how much you would get in SSDI benefits, according to your income background. For example, let’s say the SSA calculates your monthly benefit amount to be $1,200. It’s great that you will receive these benefits, but it’s March 2022 and you have not received a check since November 2020.
This is when back pay enters the picture. You started managing your disability about 15 months ago, which the SSA defined as your onset date. For SSDI, the law states that you can only receive SSDI benefits after a five-month waiting period. Once that time is over, then you can begin getting SSDI benefits, which would be the start of the 6th full month. This means that you deserve up to 10 months worth of back pay.
The SSA’s Way of Managing Back Pay
Once the program approves the claim, the SSA typically takes 60 days to pay the past-due benefits. Let’s say that you paid for legal representation during the appeals process. The SSA is responsible for paying for the legal services from your back pay.
Before anything happens, the SSA needs to agree on your legal representative’s fees. This would include a lawyer or legal advocate. Fortunately, the legal fees are generally limited to at most 25% of your back pay or $7,200. This depends on whichever costs less. If you receive $12,000 for your back pay based on the example above, then your lawyer will receive $3,000 from the total amount of your back pay.
Is SSDI the Only Program that Offers Back Pay?
Supplemental Security Income (SSI) also offers back pay, which is another program of the SSA! SSI is run by states to offer benefits for people who have limited income and meet other eligibility requirements. SSI operates differently than SSDI when it comes to back pay.
With SSI, you can receive back pay starting from your application date, unlike the SSDI that starts on the date of your onset disability. Furthermore, SSI does not have a waiting period like SSDI, which has a waiting period of five months. If your total back pay is more than the SSI program’s maximum benefit amount per month for 2022, then you will not receive it in a lump sum. If the amount doesn’t qualify for a lump sum, it will be paid in three installments of intervals that are 6 months.
What is the Maximum Amount You Can Receive from SSDI or SSI, in Terms of Back Pay?
You should understand how to manage back pay when it comes to SSDI and SSI. The best part of back pay is that both programs do not limit the amounts of benefits that a recipient can get.
Can Your Back Pay Affect Your Taxes?
You should know that some of your Social Security benefits could be taxable, in the case that your total income passes a specific level. Fortunately, people have the option to reduce the possibility of passing that level, thanks to the Internal Revenue Service (IRS). Some people can redefine their back pay to the last year and roll it into the same year’s income. This is all for reducing their chance of taxing their Social Security benefits, which is referred to as a lump-sum election.
Back Pay Examples
Those that get back pay have a “date of entitlement” which is when the SSA starts owing recipients benefits. However, SSI works differently than SSDI. This is because your SSDI benefit back pay comes five months after the date of your onset disability. Since we already showed you an example of SSDI back pay before, it’s time for an SSI back pay example. Let’s say that the date of your disability EOD is on January 1st, 2020 and your application date is on March 1st, 2020. You received approval on January 1st, 2021 and the date to receive benefits started on April 1st, 2020. The time between your application date and when you received approval is 10 months with an approved amount of benefits worth $500. That means, you are entitled to receive $5,000 back pay!
The Final Verdict
A lot of people find back pay confusing, but it can be simple! The official name of back pay is past-due benefits. Back pay is the funds you can receive from the time you applied and when the program actually gives you those benefits. It can take a while to process a disability application, which leads to postponing your application’s approval. Additionally, receiving SSDI benefits take about five months because of the waiting period. SSI benefits, on the other hand, do not have a waiting period. If you are interested in finding out more about back pay, then you should contact the SSA. Good luck and do not lose hope!