False Income Tax Returns and Your Social Security Disability Claim

June 30, 2011

As a federal agency, the Social Security Administration [SSA] receives reports of income that claimants for Social Security Disability benefits file with the IRS. This information helps the SSA to calculate eligibility or ineligibility for certain SSA benefits and the amounts that are paid. In obtaining this information, the SSA also receives disclosures of unemployment benefits, other governmental benefits, as well as reported earnings from employment and self-employment.

In these times of economic hardship, some people have been lured into filing tax returns that report self employment earnings that have actually not been earned or earned at lesser amounts than is reported on the tax return. Such returns are fraudulent. The recent government stimulus packages and possibilities for tax rebates and refunds have made these fraudulent tax returns a greater temptation as people seek to get some financial relief. Unfortunately, filing a false tax return has implications that exceed the benefits of the rebate or refund that was received and can have a detrimental effect on the receipt of Social Security benefits..

First, a false tax return is a crime that could subject the filer to penalties, fines, interest, and even criminal action being taken against them. The false return may not be discovered for years, compounding the amount of fines and other assessments over time. A small refund could subject the filer of the false return to double and triple the liability when the IRS seeks refund of the improperly earned rebate or refund.

Second, the false information is reported to SSA that then assumes that the reported earnings are correct. The effect is that a claimant for SSA disability benefits will be found to have worked and earned income during a time that the same claimant is alleging that he or she is unable to work. Although the claimant may have a real disability, the false return can result in denial of a SSA disability claim because the claimant will appear to be working and not reporting it to SSA. The effect is evidence that the person does not meet the requirements of "inability to work" that is necessary for SSA disability benefits. Even worse, it can raise serious credibility problems about the truthfulness of other statements the person is making.

Actions we take in desperation are always potential risks. Involving federal agencies in desperate actions is even more risky and inadvisable. If you have filed a tax return to seek a refund or rebate you may not have earned, it would be in your interest to seek the advice of an experienced social security disability attorney or tax professional.