How do I add a reference note to the return indicating the benefits are for a 911 disability and not subject to taxes?

[jbest2]

I am preparing a return for a client who received SSDI from a 911-related illness. The amount is not taxable. I am using Proconnect.

[sjrcpa]

Did they even get a 1099? I thought they weren't issued for SSDI?

EDIT: And Yes I know whether or not you get a piece of paper does not alter the taxability of something.

[BobKamman]

SSI is Supplemental Security Income, not taxable but with income limits so most recipients don't file returns. 

SSDI is Social Security Disability Income, same as Social Security retirement benefits, taxable if there's enough other income.  Maybe this was a retroactive payment covering multiple years?  I'm not aware of any special provisions for victims of 9/11, but that was 23 years ago.  

[jbest2]

Yes, they received a 1099. They also provided evidence that they were approved for 911-disability payments

[jbest2]

IRS pub. 3920: 

For tax years ending after September 10, 2001, disability payments (including Social Security Disability Insurance (SSDI) payments) are not included in income if they are for injuries incurred as a direct result of a terrorist attack (including the September 11 attacks, anthrax attacks, and Oklahoma City attack) directed against the United States (or its allies). However, you must include in your income any disability payments you received or you would have received in retirement had you not become disabled as a result of a terrorist attack.

[BobKamman]

So you found a black swan, a Code Section 692 case. The taxpayer has still not reached normal retirement age? Newly qualified for SSDI, but can show it was as a result of 9/11?

Example. Dan, a firefighter, was disabled as a direct result of the September 11 terrorist attack on the World Trade Center. He began receiving Social Security Disability Insurance (SSDI) benefits at age 54. Dan's full retirement age for social security retirement benefits is age 66. Dan's birthday is April 25. In the year Dan turned 66, Dan received $1,500 per month in benefits from the Social Security Administration. Because Dan became eligible for a full retirement benefit in May, the month after he turned 66, he can exclude only four months of his annual benefit from his income ($6,000). Dan must report the remaining $12,000 on Form 1040, line 20a, or Form 1040A, line 14a. He also must complete the Social Security Benefits Worksheet in his tax return instructions to find out if any part of the $12,000 is taxable.

If you continue reading Form 3920, it gives an address in Kansas City to mail returns asking for this type of “tax forgiveness.” See pages 11-12. But it’s not clear to me whether that’s just for decedent returns.

I looked at the Social Security website, but didn’t find anything about whether the SSA-1099 can be corrected, and what evidence they need.

[BobKamman]

And technically, it's a Section 104 exclusion, which references Section 692 for the definition of who qualifies.  

[Terry53029]

From pub 3920. Link. https://www.irs.gov/publications/p3920#en_US_201409_publink10005705

Disability Payments

For tax years ending after September 10, 2001, disability payments (including Social Security Disability Insurance (SSDI) payments) are not included in income if they are for injuries incurred as a direct result of a terrorist attack (including the September 11 attacks, anthrax attacks, and Oklahoma City attack) directed against the United States (or its allies). However, you must include in your income any disability payments you received or you would have received in retirement had you not become disabled as a result of a terrorist attack.

[jbest2]

Thank you

[BobKamman]

Not quite sure why you are thanking @Terry53029 for posting the same paragraph from Pub 3920 that you posted yesterday, but there is always a need around here for people who are exceptionally polite.l