One of the drawbacks of the Social Security Disability Insurance (SSDI) application process is that it can be lengthy. As a result, nearly everyone who applies for SSDI will be owed some form of back pay by the time his or her application is approved. In this section we will discuss SSDI back payments, including how the Social Security Administration calculates the benefits you are owed, how your disability onset date is determined, and how and when your SSDI back payment will be distributed to you.
SSDI backpay is the SSDI assistance that you are entitled to from the date of your application until the month you are approved for those payments. Note that SSDI back pay is different from retroactive pay, which is the amount that the Social Security Administration will pay you for any eligible time that you were disabled prior to filing your SSDI application. For more information on distinguishing back pay from retroactive pay, please see our article entitled “Back Pay vs. Retroactive Pay.” And for more information on retroactive pay, see our article entitled “Retroactive Pay Overview.” This article will focus upon back pay only.
As every SSDI applicant knows, the SSA takes a long time in processing SSDI applications, an average range can be from 3 to 6 months. This processing time results in many SSDI applicants being entitled to disability back pay. Calculating disability back pay benefits depends upon three factors: Application Date, Disability Onset Date, and the Five Month Waiting Period.
The first, and simplest, part of the disability back pay calculation process is your application date, which is just what it sounds like. When did you apply? Your application date will be the first factor used in determining the timeframe for which you will be entitled to back pay.
The next step in determining your SSDI back pay is to determine your disability onset date. When did you become disabled according to the SSA’s definition of “disability?” Your disability onset date will either be the date you claim to have become disabled, or the date that the SSA determined that you became disabled – which may or may not be the same date.
When you complete your SSDI application, you will indicate the date upon which you became disabled. This is known as your Alleged Onset Date, or AOD. If the SSA determines that you are disabled, they will use your AOD to determine for how long you have been disabled. They will then look to your medical information and work histories to see if that information supports your AOD. Depending on this information, the SSA may or may not agree with your AOD.
If the SSA agrees with your AOD, then this date is no longer just alleged to be the date that you became disabled – this date actually becomes your official Established Onset Date, or your EOD.
If, on the other hand, the SSA disagrees with your AOD after reviewing your medical information and work history, then they will ignore your AOD and instead select their own date upon which they determine you to have become disabled. It is this date which is now your Established Onset Date, or EOD.
The important thing to note is that while the date you allege to have become disabled on your SSDI application is important, it does not dictate your SSDI back pay benefits. If the SSA agrees with your date and makes that your EOD, great. But if they do not agree with your AOD and instead establish their own EOD, it is this date which will determine your back pay amount. In other words, the SSA’s EOD is the date which is used to determine your SSDI back payments.
This last part of your SSDI back pay calculation is relatively simple. Once your disability onset date has been established, you must wait five months after that date before you will become eligible for benefits. This is referred to as the 5 month waiting period, and it applies to all SSDI benefit recipients. The idea behind the 5 month waiting period is that SSDI benefits are not supposed to be a short term disability program, but rather a long term or sometimes lifelong disability program.
Therefore, while you may have become disabled on date X, you won’t become eligible for benefits until date X + 5 months. This date, the X + 5 months, is referred to as your entitlement date. So, to calculate your entitlement date, you simply add 5 months to your established disability onset date, or your EOD. You use your entitlement date in order to calculate your SSDI back pay.
Generally speaking, you will be entitled to back pay from the date of your SSDI application until your monthly benefits are awarded. In practice, this means that you will receive benefits for the time period that you have been waiting for the SSA to approve your application. To determine just how much, you need to look at your application date and your entitlement date.
As long as your entitlement date falls before your application date, then you will be entitled to back pay from your application date forward. (You may also be entitled to retroactive pay – see our article on retroactive pay for more information.)
As an example of how your EOD and application date determine your back pay amount, let’s look at the following example:
Say that your EOD is January 1. You would become eligible for benefits on June 1, or 5 months later. If you applied for SSDI anytime after June 1, then you would be entitled to back pay beginning on that date. Let’s say, however, that you applied for benefits on March 1. Although you were disabled at the time you applied for benefits, you are not eligible for payments during this time because it falls during your 5 month waiting period. Therefore, when calculating your back pay, you would still only be entitled to benefits back to June 1, even though you applied in March.
All of these dates and terms can be confusing, so we encourage you to review multiple examples of these terms being used in practice so that you can become familiar with them. For an extensive list of examples, please see our article “Back Pay vs. Retroactive Pay.”
As stated above, in order to receive your full amount of back pay, your entitlement date must fall before your application date (otherwise you will lose some of your back pay to the 5 month waiting period). And remember that your entitlement date is determined by your disability onset date (entitlement date = onset date + 5 months). All of this leads to one general conclusion: an earlier onset date means higher back pay. This is where having an attorney can be extremely helpful. An attorney can help you to establish a favorable onset date in order for you to recoup as much back pay as possible. This is because a well-practiced attorney is familiar with the SSDI application process and knows what the SSA needs to see in order to agree with your alleged onset date (AOD), and can assist you with compiling the necessary information for supporting your claim.
SSDI back pay distribution
Unlike your ongoing SSDI monthly payments, your back pay will be generated and issued to you in one lump sum.
Obviously, any back pay to which you are entitled to you will not be paid until and unless you have been approved for SSDI. And depending upon whether your case is initially approved or if you must file for an appeal, your application process can take a year or more. You should be prepared to wait at least this long before you will receive your SSDI benefits and, therefore, your back pay.
Once your SSDI application is approved, your back pay will be issued sometime thereafter, but the processing times vary. On average, most people wait 1-2 months before receiving their lump sum back payment.
When you receive your SSDI back pay lump sum, no federal taxes will have been withheld from it. Instead, the IRS will issue you a 1099 tax form, and they will continue to do so each year you receive SSDI. Also, assuming that your lump sum is sizeable, you might be concerned about how it will affect you for tax purposes. The IRS does not penalize SSDI recipients for receiving their SSDI back/retroactive pay all at once. Consult your tax professional on the ways in which you can claim your SSDI back pay in order to reduce or eliminate any back taxes owed.
In addition, if you chose to use an attorney when filing your SSDI application (and/or your appeal, if necessary), then the SSA will deduct any attorney fees owed from your back pay award.