However, the government doesn't want to see all of your benefits taken away by taxes. (See! Sometimes the government does us a favor.) So, if your income is under under $25,000 including half of your Social Security benefits (don't worry about the other half), then you don't have to pay taxes. If you're only receiving Social Security benefits, this is you. If you're married and you and your spouse together have $32,000 or less including half of your benefits, then you don't have to pay taxes on your benefits.
If you're making more than $25,000 if you're single and $32,000 if you're married, then 50% of your benefits are taxable. The other half are tax-free. You just pay the normal amount you would under your tax bracket. If you're single and you make more than $34,000 and $44,000 if you're married, then 85% of your benefits are taxable. If you're not going to a CPA, I really recommend using TurboTax or a similar program for this to make sure you're paying the right amount. No one should ever be paying taxes on more than 85% of their benefits.
But what if you were just approved for disability benefits and just got a huge amount of back pay that was paid out as a lump sum? That would certainly put you in the higher tax bracket! No one wants that.
The back pay is considered to have been paid for the past years where you should have been receiving the benefit. So if you received back pay for 2012, 2013 and 2014, you can file your taxes in 2015 and just do an amendment with your taxes showing earnings for 2012, 2013 and 2014. Hopefully, your earnings from Social Security in those years won't be high enough to have to pay much, if anything, in taxes. But it is far less likely with the payments spread across multiple years to have the massive tax bill that you would have had if it was all counted as income in 2014. Again, if you were paid a large lump sum last year, you really want a CPA to handle your taxes this year. It's much easier (and cheaper) to get it done correctly the first time than risk making a mistake.
Taxes and Social Security payments is a really complicated subject. When in doubt, ask a CPA. Social Security also has good information here. Please contact The Foster Law Firm with questions (844)303-0735.