Liz Copan / ecopan@summitdaily.com
SILVERTHORNE — When Silverthorne resident Mark Stoveken was left owing $27,000 to the IRS due to a lump sum payment of disability benefits, he reached out to representatives in Congress to try to remediate his situation.
The IRS rule that put Stoveken in this situation is complicated. In 2015, Stoveken became disabled, and he could no longer continue working. He filed a Social Security disability claim. The process is lengthy and can take months or even years to get approval.
In 2017, Stoveken and his wife purchased health insurance through the Affordable Care Act. Since they were living on a limited income and drawing out of savings at the time, Stoveken received income-based tax credits that are used to subsidize the cost of insurance.
In October 2018, Stoveken was notified that his claim for Social Security disability payments had been approved, and he received a lump-sum payment meant to account for the time it took to process the claim. The lump-sum payment meant he was no longer eligible for the tax credits he received under the Affordable Care Act, and he had to pay back more than $27,000.
“That was something that we had not ever planned for, had not ever anticipated, and it created quite a hardship on us from a financial perspective,” Stoveken said. “Had we known that we were going to get that disability decision, we would never have been foolish enough to buy health insurance for $27,000 in one year. We would have looked at something much different or perhaps would have gone uninsured.”
Despite the Social Security Administration back paying the money for multiple years, the IRS views it as income for the year it was received, which is how Stoveken and others wound up having to pay large sums of money.
When congressional Reps. Joe Neguse and Jared Golden heard Stoveken’s story, they stepped in.
“The result of this rule is that people with disabilities, widows, new retirees and others qualifying for Social Security disability or other benefit payments can end up with large and unexpected tax bills,” Neguse said in a news release. “Due to this flaw in the system, one of my constituents owed just over $27,000 to the IRS. It is simply unacceptable to allow an oversight like this to put the financial stability of middle-class Americans in jeopardy.”
Neguse and Golden developed the Fairness in Social Security Act that would remove lump-sum payments, which account for owed income prior to the current year, from the calculation of current year income.
Social Security task force co-chair Lisa Ekman announced her support for the Fairness in Social Security Act in the news release, calling it a “common sense bill.”
While getting this bill passed would be a major step in fixing the problem, Stoveken is urging for retroactive action to reimburse people who have been adversely affected by the rule.
“Social Security disability is meant to replace income that you’re not able to earn as a result of your disability. So it’s absurd and really unfair to deprive anybody who has gone through this process of that income when they earned it. It was something that they paid for all their lives through their Social Security contributions, and for the Internal Revenue Service to mop that up in one fell swoop, it’s not equitable, and it needs to be fixed,” Stoveken said.
The bill is drafted and will be presented in a congressional hearing in the coming months. Constituents who have had experience with the current rule are encouraged to write to Neguse or contact other representatives in their congressional districts.