.by Anura Guruge
This had to do with an arcane law that taxes what is called the ‘workman’s comp offset‘ in one’s Social Security disability. At a time when the fairness of the overall tax system is being debated it is very germane to talk about this since it taxes one on benefits that one did NOT RECEIVE! Yes, you read that right. You pay taxes on SS benefits you did NOT receive. ‘Workman’s Comp Offset’ applies to those disabled that received a Workman’s Comp. settlement in addition to the SS disability they receive. The ‘OFFSET’ is the amount that SS deducts from your SS disability to compensate for what you got from Workman’s Comp. That is perfectly fair and valid.
[Here is a very crude, and probably unrepresentative example just to show you what we are talking about. Lets say your SS disability calculations based on all the formulas they use is meant to be $162/month. You receive a Workman’s Comp settlement, say a lump sum, which per the laws of most states, including NH, is then reported to the SS as an amortized MONTHLY payment spread over the recipient’s life expectancy. For this example lets say that SS was using a Workman’s Comp monthly payment of $32. SS would now reduce the $162 by $32 and only pay $130 a month. Get it?]
Here is the CATCH. SS, in the annual SSA-1099 tax document they issue and send to the IRS, states the ‘Offset’ as part of the taxable benefit. So, per my crude example above, they would report $32 x 12 months, $384, to the IRS as the ‘workman’s comp offset’. That $384 is taxable, though it is actually the monies the SSA never paid the recipient. To be fair, this is also ‘OK’ because you don’t get taxed on ALL of your SS payments. So by the time you have done all of the ‘1/2 of line 2 times 0.85 of line 16 less 1/3 of line 38‘ the numbers become manageable. Quite a few people don’t pay any taxes on their SS anyway.
But, if the SSA makes a $58,958 ERROR in what they report on your SSA-1099 you are in deep trouble! Since it is reported to the IRS there is no wriggle room. That was what happened to my wife. We were very fortunate that Senator Jeanne Shaheen’s office, in particular Cara Osborn, Special Assistant for Constituent Services, of the Dover Office, jumped in, contacted the Social Security Administration (SSA) and helped us get a new, amended SSA-1099 – with just enough time for us to file our tax return without having to seek an extension (something I had never done and was very nervous about having to do). Thank YOU, Cara … and Mrs. Shaheen.
My wife who had been a Licensed Nursing Assistant (LNA) for over 9 years got badly injured in mid-2006 when she and another LNA were trying to transfer an elderly patient from her bed to a chair. During the transfer the patient ‘let go’ — basically stopped trying to support herself. Though both LNAs were using the ‘transfer belts’ that they are supposed to use, my wife ended up supporting a person considerably heavier than her. She herniated multiple disks in one go. She was off work and is still in pain despite major back surgery. She got a Workman’s Comp settlement in 2008 and after a hearing with a judge, in ‘late’ 2010, SSA disability. So, that is the background.
Since her SSA disability only kicked-in in late 2010, SSA didn’t get around to doing all of the Workman’s Comp calculations till 2011. So everything, which is backdated etc., was included in the 2011 SSA-1099. As soon as I saw it I knew that something was wrong. The reported ‘workman’s comp offset’ was close to three times her ENTIRE workman’s comp. settlement. Even with backdating etc. I could not see how any offset could end up being three times what was being offset. My wife called the SSA. This was in mid-January, 2012. After 40 minutes she spoke to a lady. At one point this SSA lady came to the same conclusion as me: ‘how can the offset be so much bigger than the original amount‘. She promised that she will get it looked at and that we will receive a letter in a month.
The month anniversary came. No letter. We waited 3 days and my wife called again. This time an even longer wait. They said ‘Oh, you should get a letter by March 15‘. I was getting worried. We went down to the local SSA Office in Concord and waited in line. They were MOST HELPFUL. We spoke to two agents. They both said: ‘there is something wrong‘. They then also went onto say: ‘we can’t fix it here. It has to be fixed in Baltimore and you are looking at at least 2 months‘. That would have put us beyond April. I asked if there was anything else we could do. They said you could try contacting one of the US representatives or Senators. I decided to contact Mrs. Shaheen given that we have always been very impressed with her. We wrote to the D.C. office. Within 72 hours we had a call. We had to sign and return a ‘release’ form so that they could contact SSA on our behalf. We did that forthwith. Cara, from Dover, handled all of this graciously — always supportive, ever helpful. On March 19 we got an amended SSA-1099, with the offset $58,958 less than that originally reported. I had time to do our taxes.
Thank you Mrs. Shaheen, Cara …, all at Mrs. Shaheen’s multiple offices, and all those at SSA that helped us out. [Yes, my wife has had two lawyers. The ever impeccable Shawn Nichols of Wescott, Dyer, Fitzgerald, & Nichols, PA, who handled her Workman’s Comp and another who handled the SS hearing. My wife contacted them both. There was nothing they could do. This problem had to be fixed by the SSA.] So, I hope this helps anybody else that finds themselves in a similar bind.