Supplemental Security Income, or SSI, is designed to provide assistance to individuals with limited resources who are older and those who are blind or otherwise disabled. It is not taxable income. Often, recipients of SSI have no filing requirement, but that does not mean they should forgo filing for a few reasons.
Why Should You File?
A major reason to file for SSI beneficiaries is to recover tax credits, such as the Earned Income Credit for those who work or the Child Tax Credit for individuals with qualifying children.
Another reason to file a tax return is to recover Economic Impact Payments, popularly known as "stimulus payments," from either 2020 or 2021. The CARES Act of 2020 included a provision for the distribution of direct cash payments to qualifying American citizens. If an otherwise qualified individual did not receive the Economic Impact Payments they were due, the payments can be recovered as a tax refund by filing a tax return for the year in question, even if there is no income on the return.
Filing taxes can also help avoid fraudulent returns from being filed using a specific Social Security Number. Filing a return, even if it is not required, will ensure that nobody else can file using your Social Security Number.
Read More: How to Get Social Security Benefits & TRS Benefits
How are SSI Benefits Treated?
SSI is a supplemental income source provided by the federal government that is funded through taxes. It exists to provide support for eligible citizens who can demonstrate financial need in addition to advanced age or disability. It requires passing an application process for eligibility.
Regular Social Security benefits refer to retirement benefits paid by taxpayers throughout their working careers. You don't have to demonstrate financial need to receive these retirement benefits. It is funded by the payroll taxes taken out of W-2 wages and self-employment taxes. These taxes are known as FICA, and they are applied toward Social Security and Medicare.
SSI is not taxable and should not be confused with other Social Security benefits, including SSDI. SSI is not the same as SSDI. Social Security Disability Insurance (SSDI) is for individuals who have a disability but have also paid into Social Security through employment or another family member.
Can You Owe on SSI Income?
While SSI does not constitute taxable income, benefits can be reduced if the recipient does not meet the limited resources requirement. Countable resource limits for SSI equal a total of $2,000 for individuals or $3,000 for married couples. In simplest terms, a resource is defined as cash or an asset that can be converted into cash.
Countable resources are measured to include assets such as cash, life insurance, vehicles and other property. Many SSI recipients also receive other Social Security benefits, and it is important to know that, unlike SSI, those benefits may count toward total income or even be taxable.
It is important for individuals receiving SSI to stay within the income and resource thresholds for their benefits. However, there are also assets or resources that do not count toward SSI limits. A primary residence is one example of a non-countable resource.
SSI benefits can be reduced if a person earns too much income, but the SSI itself is not taxable as income. Alternately, regular Social Security benefits can be counted toward taxable income when incomes levels rise above the $25,000 threshold for individual filers or $32,000 for joint filers.
Read More: Social Security Tax & Pensions
Hashaw Elkins is a financial services and tax professional, as well as a project management consultant. She has led projects across multiple industries and sectors, ranging from the Fortune Global 500 to international nongovernmental organizations. Hashaw holds an MBA in Real Estate and an MSci in Project Management. She is further certified in organizational change management, diversity management, and cross-cultural mediation.