Do you or someone you know receive Social Security Disability Income (SSDI)? If you do, then you have probably heard about back pay. Back pay is not the formal term that is used to describe “past-due benefits” from the Social Security Administration (SSA). But, that is the common term that most people use. These past-due benefits focus on a period where you were medically qualified to get disability assistance benefits, but you were still waiting on the approval to actually receive them.

If you are dealing with back pay, then you should know that most people are. This is because the process of a disability claim can take a while; the problem has nothing to do with you. You will find that the process takes an even longer time, in the case that you were denied but submit an appeal on the denied approval. Fortunately, the Social Security Administration will ensure that you receive the benefits that you were due. But, you should understand that finding out back pay can be a little complicated. This article will make it easier and simpler for you to understand.

How Does SSDI Back Pay Operate?

Back payments can go as far as the date of your original application, which could have been a while ago. An example from the  AARP on how the SSDI back pay operates could make things easier. In this example, let’s say that you had arthritis that gradually got worse and stopped you from working on October 18th, 2020. After that, you applied for SSDI benefits on November 1st, 2020. Let’s say that the SSDI denied their approval for you to get benefits. Then, naturally, you submitted an appeal and received a hearing with an administrative law judge.

During the hearing with the judge, you will need to present evidence of your condition to get the judge to rule in your favor. If you are lucky and the judge rules in your favor, then you should receive disability benefits that date back to October 2020. The Social Security Administration would assess your SSDI benefit, depending on your previous earnings history to determine your benefit amount. Now, let’s say that your benefit amount was calculated to $1,200 per month. That would be a great help for your current situation. But, it’s 2022 and you still have not received a check since October 2020. What happens then?

This is where back pay comes into play. Historically speaking, 15 months have passed since you began managing your disability. The Social Security Administration will consider that date as your onset date. Typically, SSDI benefits have a waiting period of five months, according to the law.  After the waiting period is over, then the SSDI benefits will start. This means that the benefits would take place the 6th full month after your onset date. Additionally, you have the right to receive 10 months’ worth of back pay.

How Does the Social Security Administration Manage Back Pay?

Once the Social Security Administration approves your claim, then the SSA has about 60 days to pay off your past-due SSDI financial benefits. Typically, you will receive back pay in lump sum. Throughout the appeal process, you probably need to pay for legal representation for your disability case. In that content, the SSA is responsible for paying their fees from your back pay. So, you need to be very aware of the amount you should receive from the SSA.

The Social Security Administration is required to approve of the fee agreement with your legal representation in advance. This could be a lawyer or a legal advocate. Typically, you will find that the fee is capped at no more than 25% of your back pay or at $7,200. This depends on whichever is less. If the total amount of your back pay was worth up to $12,000, then you should expect your lawyer to receive payment of $3,000.

You are probably wondering where the $12,000 came from. Do not worry; we did the calculations for you. Let’s say that your total amount of back pay is $12,000. That would come from $1,200 SSDI benefits from our previous example, multiplied by 10 months after the initial waiting period. Ta-da! That’s where $12,000 comes from.

Can I Only Get Back Pay from SSDI?

No, that is not the only way you can get back pay. You can actually get back pay when you are dealing with Supplemental Security Income (SSI). The SSI Program is another program that the Social Security Administration provides. You will find that the SSI Program is a state-run welfare program that offers payments to people with disability and low-income residents that meet other eligibility requirements. But, the back pay for the SSI Program works a little differently than the SSDI Program.

When you are looking at your back pay for the SSI Program, you will find that the start date of the payment is relevant to your application date. On the other hand, you will find that the SSDI focuses on your onset date. You will find that another advantage of the SSI Program is the fact that it does not have a waiting time frame, as opposed to the five month waiting period for the SSDI Program.

These factors mean that the calculation for your back pay works differently than the SSDI Program. You should also note that if your total back pay amount was more than the SSI Program’s maximum monthly amount of $943 (as of 2024), then you probably will not receive it in lump sum. Typically, you will receive it in three installments throughout six month intervals.

What is the Most That I Can Get from SSDI or SSI Back Pay?

You should have a very clear and definitive understanding of how you deal with back pay for both the SSDI Program and the SSI Program. But, the main advantage for these back pay opportunities is that there is  no maximum amount for either Program!

Does Back Pay Affect My Taxes? Partially, Yes. Here’s How!

You need to keep in mind that a part of Social Security benefits are taxable. This means that a section of your back pay could be taxable, in the case that your total income surpasses a specific limit. Fortunately, the Internal Revenue Service (IRS) is fully aware of that and offers individuals the chance to minimize their chances of exceeding the income limit. The IRS allows an individual to refigure their back pay amount from the previous year and roll it into that year’s income for tax purposes. That way, you have the opportunity to minimize your chances of passing the limit. You will find that the IRS refers to this as a lump-sum election.

In Conclusion

Back pay could be a confusing concept. But, it does not need to be. Officially, back pay is known as past-due benefits. Back pay is the funds you receive for the date you applied for benefits until the date you actually received approval to get those benefits. This is because it can take a while to deal with a disability application and get approval. But, you need to keep in mind that the SSDI benefits you receive have a five month waiting period. But, there is no waiting period for the SSI Program.