Dear Tax Talk,
If I understand correctly, I don’t have to pay taxes on disability payments to me as long as it is under $25,000 per year.

I have been contacted by an individual in Fresno, Calif., who was calling me about paying taxes on a previous year’s “income” from Social Security disability. Once the amount of my benefits for that year has been clarified, Mr. Berg will contact me to get the amount of benefits received to avoid going to Tax Court on this matter. Mr. Berg is not from the IRS but he works with them apparently to collect taxes.

Any advice you can give to me with respect to whether my previous benefits are taxable or not so I know what to say to Mr. Berg?

— Lou

Dear Lou,
If your only income is Social Security disability, then you shouldn’t be paying any taxes or have an obligation to file a return. If you have SSI and other income from other sources (including tax-free municipal interest) then you need to determine the taxability of your benefits. The IRS lists seven points that you should follow to determine the taxability of SSI benefits.

Assuming you have your correct address on file with IRS, I would be leery of discussing any matter over the phone unless you can positively identify that it is in fact IRS. Considering spoofing, the widespread practice of displaying a misleading number on a recipient’s caller ID, I wouldn’t even rely on caller ID. Usually this type of underreporting is handled by written communication with IRS issuing a letter of underreporting known as a CP 2000.

The fact that Mr. Berg mentions that you need to go to Tax Court is rather odd, as the taxation of SSI benefits is fairly black and white. It sounds like an intimidation tactic. Additionally, the IRS has discontinued the use of third-party collection agents. Further, an IRS collection officer does not determine the taxability of SSI benefits. This is an exam function. Most definitely do not send any money for taxes to anyone that is not the IRS. You can report Mr. Berg to IRS by following the procedures listed on the IRS website.

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