Retro SSDI Payments & Taxes, Medicare B Questions, Etc.

Margaret · Joined: 25 Aug 2007 Posts: 10

Hello,

Back in April I posted questions re the tax implications of a
retroactive SSDI award and repaying my employer's dis insurance co for
the SSA's share of my coordinated disability benefits. Frederic Lorca
kindly posted a detailed response re claiming a §1341 repayment credit
as opposed to deducting the repayment on Sched A, as well as the Lump
Sum Election. I've read the pertinent portions of IRS pubs 525 and 915,
and I still have a few questions.

I recently won my appeal (with the help of an attorney), and the fully
favorable judgment resulted in a disability date of 09/01/2004 with SSDI
benefits retroactive to 02/01/2005 and Medicare B coverage retroactive
to 02/01/2007 (due to elimination periods). Further, I will not be
using Med D, as I still retain my employer's Rx coverage as part of my
disability benefits.

1. Are Medicare B premiums deductible as medical insurance premiums?

2. Because my Medicare B coverage is retroactive to 02/01/2007, so are
the premiums, which will come out of my first pmt (yet to be received).
Assuming they're tax deductible, can I deduct the retroactive premiums
on my 2008 taxes (the year in which all will be paid), or will I have to
do something more complicated?

3. What about the attorney fee? I assume that simply comes out of my
pocket and there's no deduction to mitigate this cost. Am I correct?

4. When I completed my 2004 and 2005 taxes, I felt that I did not
qualify as totally and permanently disabled, so I did not check the
"disabled" box, even though my employer had put me on LTD retroactive to
09/01/2004. (Checking the "disabled" box makes no difference on my US
taxes, but it does result in a MI credit of $2K each year.) Further, in
2005 I was told by my employer that if I expected to return to work, I
needed to keep my skills up-to-date (obviously). (I was a computer
network security pro.) Consequently I spent a few thousand $$ on
educational materials, which I deducted on form 2106, as I was not
reimbursed by my employer. I was supposed to receive this info in
writing from my employer but never did (and now won't). Looking back,
it seems to me that I really *did* qualify as totally and permanently
disabled and thus should amend my 2004 and 2005 taxes accordingly.
(Regardless, I believe I should amend my 2005 taxes to delete the form
2106 deduction.) ... I realize I do not amend my taxes for 2005-2007
for the §1341/Sched A repayment credit, but I believe I should amend
2004 and 2005 for the reasons stated above, and that I should do it once
I complete my 2007 taxes so everything's all neat & tidy for the
impending and messy 2008 taxes. Smile

Advice on this one?

I'm sorry this msg has become a tome, but I greatly appreciate any
advice you can (and are willing) to provide! Smile

Thx and Regards,

Margaret

Archived from group: misc>taxes

Arthur Kamlet · Joined: 25 Aug 2007 Posts: 2053

In article ,
Margaret wrote:
>
>1. Are Medicare B premiums deductible as medical insurance premiums?

Yes, on schedule A Line 1.

>2. Because my Medicare B coverage is retroactive to 02/01/2007, so are
>the premiums, which will come out of my first pmt (yet to be received).
> Assuming they're tax deductible, can I deduct the retroactive premiums
>on my 2008 taxes (the year in which all will be paid), or will I have to
>do something more complicated?

They are deductible only in the year actually paid.

>3. What about the attorney fee? I assume that simply comes out of my
>pocket and there's no deduction to mitigate this cost. Am I correct?

The potion of attorney's fee corresponding to the taxable portion
of SSDI is a schedule A Miscellaneous deduction subject to
reduction by 2% of AGI.

Example: Assume 85% of SSDI is includd as taxable income.
That makes 85% of the legal fee deductible subject
to the 2% reduction.

>4. When I completed my 2004 and 2005 taxes, I felt that I did not
>qualify as totally and permanently disabled, so I did not check the
>"disabled" box, even though my employer had put me on LTD retroactive to

Sory, I can't answer a MI question.
--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

Margaret · Joined: 25 Aug 2007 Posts: 10

Thank you for the info on Medicare premium & attorney fee deductions,
Arthur. I did not intend my final question as a Michigan one, though
upon re-reading, I see how it may have read like one. (Sorry 'bout
that.) I'd attempt to clarify (w/o the MI details), but I've since
gotten the question answered. Smile

Anyway, thanks so much for your help.

Regards,

Margaret

Arthur Kamlet wrote:
> In article ,
> Margaret wrote:
>> 1. Are Medicare B premiums deductible as medical insurance premiums?
>
> Yes, on schedule A Line 1.
>
>
>> 2. Because my Medicare B coverage is retroactive to 02/01/2007, so are
>> the premiums, which will come out of my first pmt (yet to be received).
>> Assuming they're tax deductible, can I deduct the retroactive premiums
>> on my 2008 taxes (the year in which all will be paid), or will I have to
>> do something more complicated?
>
>
> They are deductible only in the year actually paid.
>
>
>> 3. What about the attorney fee? I assume that simply comes out of my
>> pocket and there's no deduction to mitigate this cost. Am I correct?
>
> The potion of attorney's fee corresponding to the taxable portion
> of SSDI is a schedule A Miscellaneous deduction subject to
> reduction by 2% of AGI.
>
>
>
> Example: Assume 85% of SSDI is includd as taxable income.
> That makes 85% of the legal fee deductible subject
> to the 2% reduction.
>
>
>
>> 4. When I completed my 2004 and 2005 taxes, I felt that I did not
>> qualify as totally and permanently disabled, so I did not check the
>> "disabled" box, even though my employer had put me on LTD retroactive to
>
>
> Sory, I can't answer a MI question.

Margaret · Joined: 25 Aug 2007 Posts: 10

Arthur Kamlet wrote:
> In article ,

> The portion of attorney's fee corresponding to the taxable portion
> of SSDI is a schedule A Miscellaneous deduction subject to
> reduction by 2% of AGI.
>
> Example: Assume 85% of SSDI is included as taxable income.
> That makes 85% of the legal fee deductible subject
> to the 2% reduction.

I forgot about bill I will soon receive for the attorney's expenses.
May I include that amount along with the legal fee? It's my
understanding that some disability insurance companies actually "eat"
that attorney fee. *If* I'm fortunate to have this happen, I will still
be responsible for covering the attorney's expenses. Is there any
reason why I may not deduct 85% of this amount (according to your
example above)?

Thanks and Regards,

Margaret

Arthur Kamlet · Joined: 25 Aug 2007 Posts: 2053

In article ,
Margaret wrote:
>Arthur Kamlet wrote:
>> In article ,
>
>> The portion of attorney's fee corresponding to the taxable portion
>> of SSDI is a schedule A Miscellaneous deduction subject to
>> reduction by 2% of AGI.
>>
>> Example: Assume 85% of SSDI is included as taxable income.
>> That makes 85% of the legal fee deductible subject
>> to the 2% reduction.
>
>I forgot about bill I will soon receive for the attorney's expenses.
>May I include that amount along with the legal fee? It's my
>understanding that some disability insurance companies actually "eat"
>that attorney fee. *If* I'm fortunate to have this happen, I will still
>be responsible for covering the attorney's expenses. Is there any
>reason why I may not deduct 85% of this amount (according to your
>example above)?

If they are deductible, they are deductible only in the year
you paid them.
--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

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