If you or someone you know is a recipient of Social Security Disability Income (SSDI), then you may have heard the term back pay. Back pay is not the official term to describe “past-due benefits” from the Social Security Administration (SSA). However, it is the term that many people use! These past-due benefits refer to a period where you were medically eligible to receive disability benefits but were waiting on the approval to actually get them.
Dealing with back pay is not uncommon. That’s because the process of a disability claim can be a long process. The process can be even longer if the applicant is denied but submits an appeal on the decision. Luckily, the SSA will make sure that you get the benefits that you were due. However, understanding back pay can be a bit tricky.
Understanding SSDI Back Pay
Back payments can go as far back as the date of your original application. Let’s look at an example offered by AARP in terms of how this works. Let’s say that you had arthritis that progressively got worse to the point that it stopped you from working back on October 18, 2020. After this, you applied on November 1st, 2020 for SSDI but were denied. After the denial, you submitted an appeal and got a hearing with an administrative law judge.
During the hearing, you can provide evidence in hopes to get the judge to rule in your favor. If the judge does, then that would ultimately determine your disability began back in October 2020. The SSA would calculate your SSDI benefit based on your earnings history to find out your benefit amount. Let’s say that your benefit amount was calculated to be $1,200 every month. That’s great, but now it’s February 2022, and you haven’t gotten a paycheck since back in October 2020.
This is where back pay comes into the picture. 15 months have gone by since you began dealing with your disability. This date is known as your onset date by the SSA. SSDI benefits have a five-month waiting period by law. After this period is up, the SSDI benefits start (which means they would start the 6th full month after the onset date). After all of this, that means you are entitled to 10 months of back pay!
How Does the SSA Handle Back Pay?
Once the claim is approved, generally within 60 days the SSA pays the past-due SSDI benefits in a lump sum. During the appeal process if you paid for legal representation for your disability case, then the SSA would pay their fees out of your back pay (so be mindful of that).
The SSA needs to approve the fee agreement with your legal representation like a lawyer or advocate in advance. Luckily, the fee is usually capped at no more than 25% of the back pay or at $6,000 (whichever is less). If your total back pay was worth $12,000 (which comes from the $1,200 SSDI benefit from the example and is multiplied by the 10 months after the waiting period) then you would expect your lawyer to be paid $3,000 from that total back pay amount.
Can You Only Get Back Pay from SSDI?
No! In fact, you can also get back pay when dealing with Supplemental Security Income (SSI). This is another program that the SSA offers. SSI is a state-run assistance option that pays benefits to those that are low-income and who also meet other eligibility criteria. However, the back pay rules for SSI are a little bit different than SSDI.
When looking at back pay for SSI, the start of the payment is related to your application date as opposed to your onset date like with SSDI. Another benefit of SSI is the fact that it doesn’t have a waiting period compared to the 5-month waiting period for SSDI. Due to these factors that means the back pay calculation is different from SSDI. It’s also important to note that if your overall back pay due was more than the SSI program’s maximum monthly benefit of $841 (as of 2022) then you wouldn’t get it in a lump sum. Instead, it would come in three installments of 6-month intervals.
What is the Most You Can Get from SSDI or SSI Back Pay?
It is important that you have a clear understanding of what it means to deal with back pay for both SSDI and SSI. However, the biggest benefit to these back pay opportunities is that there is no maximum for either option!
How Does Back Pay Impact Your Taxes?
It’s important to keep in mind that a portion of Social Security benefits is taxable. That means a portion of your back pay may be taxable if your overall income exceeds a specific limit. Luckily, the Internal Revenue Service (IRS) understands that and provides individuals the opportunity to minimize their chances of passing that limit. They can provide this opportunity by allowing a person to refigure back pay from the previous year to be rolled into that year’s income for tax purposes. This is known as a lump-sum election.
What are Some Examples of Back Pay?
Individuals that receive back pay have a “date of entitlement”. Your date of entitlement is the date that the SSA would start owing benefits. SSI is different from SSDI. That’s because for SSDI benefits back pay is provided 5 months after your disability onset date. We explained an example of SSDI back pay earlier in the article. But an example of SSI back pay would be:
Bottom Line
Back pay can be confusing but it doesn’t have to be. Officially known as past-due benefits, back pay is the money that you get for the months from the date you applied for benefits and the date you were actually approved to receive those benefits. That’s because it can be a lengthy process when dealing with a disability application which results in a delay between your application and approval. However, SSDI benefits have a 5-month waiting period compared to SSI which does not. Each option is unique so it is important to have a clear understanding! If you have any questions about back pay you will want to get in touch with the SSA.