What is the difference between Social Security (SSD) and Supplemental Security Income (SSI)?
Social Security provides disability insurance benefits to those who have worked and paid Social Security taxes who have become disabled. In order to receive benefits the claimant must establish 1) that the disabling condition makes it impossible to perform any substantial work, and 2) that the disability is expected to last at least a year, or until death.
Social Security provides SSI benefits for those who are severely disabled but not eligible to receive Social Security disability insurance benefits, usually because they did not work long enough in Social Security covered employment to establish eligibility. SSI differs substantially from Social Security disability. The benefits are lower, there is no provision for dependent or survivors benefits, and the disabled person cannot own substantial assets or have substantial income from any source.
Are my Social Security disability benefits taxable?
They may be, but only if you have substantial “combined income” apart from your Social Security. The term “combined income” comes from your 1040 Federal Income Tax return form. It means the total of adjusted gross income, plus nontaxable interest, plus one-half of your Social Security benefits.
If you file your federal tax return as an individual you may have to pay taxes on up to 50 percent of your Social Security benefits if your combined income is between $25,000 and $34,000. If your combined income is above $34,000 you may have to pay taxes on up to 85 percent of your Social Security benefits. If you file a joint return, you may have to pay taxes on up to 50 percent of your benefits if the combined joint income of yourself and your spouse is between $32,000 and $44,000. If your joint combined income is more than $44,000 you may have to pay tax on up to 85 percent of your Social Security benefits.
At the end of each year, you will receive a Social Security Benefit Statement (Form SSA-1099) in the mail showing the amount of benefits you received during the year. You can use this statement when you are completing your federal income tax return to find out if any of your benefits are subject to tax. Although this form is mailed out automatically at the end of each year, an additional copy will be sent to you at any time upon your request.
If you have substantial income apart from your Social Security benefits, you will want to discuss these issues with your Social Security lawyer or with your tax preparer.
How long does a person need to work to become eligible for retirement benefits?
When you work and pay Social Security taxes, you earn up to a maximum of four "credits" for each year. The way you earn a credit has changed over the years. Before 1978, employers reported your earnings every 3 months—these credits were called "quarters of coverage," or QCs. Back then, you got a QC or credit if you earned at least $50 in a 3-month calendar quarter.
In 1978, employers started reporting your earnings just once a year. Credits are now based on your total wages and self-employment income during the year, no matter when you did the actual work. You might work all year to earn four credits, or you might earn enough for all four in a much shorter length of time.
The amount of earnings it takes to earn a credit changes each year. In the year 2005, $920 in covered earnings was required to get one Social Security or Medicare work credit and $3,680 to get the maximum four credits for the year. As of 2006, $970 in covered earnings was required to get one Social Security or Medicare work credit and $3,880 to get the maximum four credits for the year. During your lifetime, you probably will earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. Your average earnings over your working years determine how much your monthly payment will be.
