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When you apply for Social Security Disability Insurance, it will take between 3-5 months for your SSDI application to be reviewed—and sometimes more. Thankfully, the Social Security Administration will issue SSDI back pay. You are entitled to benefit payments that you would have received between the time of your application and the start of your monthly benefit payments.
How Is SSDI Back Pay Calculated?
- Established Onset Date is Determined
- Monthly Benefit Amount is Calculated
- Retroactive Back Pay Amounts are Calculated
- Total Amount of SSDI Back Pay is Calculated
Keep in mind that SSDI Benefit Payments do not begin until five months after your Established Onset Date, which is usually the date of your application. This is a standard waiting period in the SSDI application process, and its purpose is to make sure that each SSDI recipient is someone with a long term disability that needs assistance.
The formula for SSDI back payments becomes one where those 5 months are subtracted from the back pay amount—because you would have needed to wait 5 months for those payments to begin anyway.
For example, let’s say that your SSDI benefits are approved 5 months after your SSDI application. In this case, you would not get any SSDI back payments. Even though your benefits are backdated to the date of your application, it takes 5 months for the payments to begin—so that five-month waiting period wipes out your back pay.
But in another example, let’s say that your SSDI benefits take 10 months to get approved. In this case, you would receive 5 months of SSDI back pay. The standard 5-month waiting period for SSDI payments begins at the Established Onset Date, or the date of your SSDI application. But then, for whatever reason, you had to wait an additional 5 months for your application to get approved by the SSA. Therefore, the SSA will issue back payments to cover those 5 months.
However, there is a 12-month cap on SSDI back pay. So, for example, if your SSDI application took two years to get approved (which can happen), then you might think that you should be awarded 19 months of SSDI back pay (that is, 24 months to the Established Onset Date, minus the 5 month waiting period). However, that 12-month cap means you will only get 12 months of SSDI back pay.
How Much Back Pay Might I Get from SSDI?
The amount of back pay varies from person to person. Of course, before any amount of back benefits are determined, your disability claim will need to be assessed by a disability examiner. They will take a look at the Social Security disability application you have put together, which includes identifying information for each applicant, and various forms about your medical condition and your work history.
Once your disability application is assessed and approved, your monthly disability payments will be calculated. Once that monthly disability payment is established, any due benefits owed as a back payment to a claimant will be issued as a lump sum payment. Let’s take a look at the process step by step.
Established Onset Date Is Determined
When you fill out your SSDI application, you will indicate a date when you believe your disability began, which is referred to as the Alleged Onset Date. The SSA will determine when your disability began, which usually coincides with the date of your application. This date is referred to as the Established Onset Date (EOD) or sometimes as the disability onset date. If you feel you can make a serious case for an earlier date, you can file an appeal.
The Established Onset Date will become the starting point for calculating that 5-month waiting period, and any amount of back pay, should your application take longer than 5 months to get approved.
Monthly Benefit Amount Is Calculated
SSDI benefits are calculated using a formula based on your highest monthly wages or income in a 35-year period. This amount is referred to as your Average Indexed Monthly Earnings, or AIME. You will be issued 90% of your AIME under $960, 32% of everything over that but under $5,785, and 15% of anything beyond that as your Primary Insurance Amount or PIA—the amount you will receive each month. This of course, then becomes the basis for determining how much SSDI back pay you will receive.
Retroactive Back Pay Amounts Are Calculated
If the SSA honors your Alleged Onset Date, that means there has been some time before you applied for SSDI, when your disability prevented you from working. In these cases, the SSA will also issue retroactive back pay, which is different from SSDI back pay. SSDI back pay is the amount you should receive to cover any lapse in payment between your application and when you start getting payments, minus those 5 months.
Retroactive back pay is payment the SSA will award you to cover your period of disability before you even applied for SSDI. And again, there is a 12-month limit. This is a good reason to never delay filling out the SSDI application.
Total Amount of SSDI Back Pay Is Calculated
Once the SSA has established your monthly SSDI benefits payment, and once they have determined your Established Onset Date, they will be able to determine how much back pay an SSDI recipient receives. It’s important to keep in mind how this timeframe is calculated.
The Department of Social Security only counts full calendar months, so if you become disabled in the middle of a month, that month will not count towards your back pay. However, if you became disabled (again, that typically means—according to the SSA—the day you filed your application), that month will count. If there was a change in your income during the period covered by back pay, that will be reflected in your back pay, though this situation is not common.
While there is not necessarily a maximum amount of back pay you can receive, remember that it is calculated based on your previous income and limited to 12 months maximum. That said, the maximum amount that is possible to collect will vary from person to person.
How Long Does It Take to Recieve SSDI Back Pay?
There is a 5-month waiting period dated from the date of your application, or your Established Onset Date (EOD), which, according to the SSA, is the date on which you became disabled. The SSA has created this delayed payment structure to filter out any claims that are not truly long term cases of disability. As it turns out, most applications take 3-5 months to get approved, so the beginning of your SSDI benefit payments might coincide with your SSDI Award Letter.
However, some SSDI applications will take longer than 5 months to approve. If your SSDI application does take longer than 5 months, the 5-month waiting period will be subtracted from however many months it took to process—you will not have to wait an additional 5 months. By the same token, if your application is approved in 3 months, you will need to wait 2 months to get any pay at all—and you would not qualify for SSDI back pay.
When Do SSDI Back Payments Begin?
SSDI back pay will cover any time period between your EOD (application date) and your approval, minus the five-month waiting period. Technically, back pay begins on your application date. If the SSA agrees with your claim that an alleged onset date indicates your disability began earlier, they will issue retroactive benefits. But keep in mind that this retroactive payment is limited to a 12-month maximum.
When Will I Receive My SSDI Back Pay?
It usually takes around 60 days to receive your back pay. Unlike SSI, SSDI back pay is often provided as one lump sum payment. However, it can only be paid by direct deposit, so you will need an active bank account in order to receive these funds. The SSA is very careful about calculating the Social Security benefit amounts for SSDI applicants, so you should not expect an overpayment.
Is SSDI Back Pay Taxable?
SSDI back pay should not be viewed as a separate amount of money from your SSDI payments, even if it comes as one lump sum. It is money that should have been paid to you from the time of the onset of your disability. There are no special tax considerations, other than how it contributes to your total amount of income and general rules about income tax. Taxes vary from state to state but are consistent at the federal level.
If your income is under $25,000 as a single filer or $34,000 for a married couple filing jointly, your SSDI income is not taxable. If you do make more than that, only 50% is taxable. Some states might have a tax on your lump-sum back payments, but most do not.
By contrast, SSI benefits are not taxable. For one, the amount falls below a taxable threshold. Secondly, SSI benefits are themselves culled from previous taxpayer contributions, so it does not make sense to tax an SSI recipient twice. However, if you are an SSDI and SSI recipient, your income tax situation may be different, and it may behoove you to strategize your financial plan with a disability attorney.
Social Security Back Pay
When applying for SSDI, there is a standard 5-month wait that does not count towards back pay. That’s why it is always important to file for Social Security Disability as soon as you become disabled. Do not attempt to wait out your illness or see how it develops. When you apply, make sure you provide all the necessary paperwork, meet the deadlines, and show up to your interview, in order to speed up the process.
In some cases, you will benefit from soliciting the services of a Social Security disability lawyer to help you file a case. If your SSDI application does take longer than 5 months to process, you will be awarded back pay and/or retroactive pay for up to 12 months. Back pay covers any time between your application, otherwise known as the EOD.
Retroactive pay covers any time period between the onset of your illness and when you filed your application, if the SSA agrees with your claim in such matters. It may be tempting to quickly spend lump sum payment, but it’s prudent to allocate your funds wisely to needed expenses or strategize with a financial planner about how to maximize their usefulness and impact.