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employment with Citibank.2 Under the terms of the policy, if an
employee’s disability lasted for more than a year, the employee
was obliged to apply for Social Security benefits. Accordingly,
in July 2002, Mrs. Flores applied for Social Security benefits,
and she began receiving benefits in October 2002 by direct
deposit to her bank account. In 2002, Mrs. Flores received
Social Security benefits of $8,820, which included benefits of
$6,772 paid in 2002 for 2001.
Mrs. Flores received a Form SSA-1099, Social Security
Benefit Statement, for 2002. Box 5 of that form reported “net
benefits for 2002" of $20,675, which was described as follows:
Paid by check or direct deposit $8,820
Worker’s compensation offset 11,855
Benefits for 2002 $20,675
Petitioners attached the Form SSA-1099 to their 2002 Federal
income tax return. Believing that the workers’ compensation
offset was not includable in their income, petitioners wrote the
following explanation of their position on the Form SSA-1099:
Box 5 benefits paid 2001 & 2002 is $8,820.00.
$11,854 paid by worker’s compensation not subject
to income taxes, not paid by SSA.
2 Mrs. Flores paid her share of the premiums on this policy
through payroll deductions.
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Last modified: May 25, 2011