For tax purposes, who decides whether or not you’re disabled? Is it the IRS and your state revenue department? How do they make the decision?
What tax purposes? Where does it ask?
I don’t really know what it means to “be disabled for tax purposes”–and I’m not saying that that’s a nonsensical notion, I’m just expressing my own ignorance here.
Anyway, how taxes generally work is that you report a fact (i.e., your income, your deductions, that you had a kid, your status as disabled) and if the taxing authority has reason not to believe that fact, then they audit you. So, the answer to your question is that you first determine it, but if you stray from published guidance from the relevant taxing authority, they’ll audit you and set you straight.
Bottom line is that you should research relevant authority from the particular taxing jurisdiction you are concerned about to determine what they consider as disabled.
I believe some things can be deductions for people who are disabled. For example the cost of adding a wheelchair ramp to your home. I don’t know how you prove it to the IRS, but if you are receiving SS benefits based on a disability that should do it.
If you really have a wheelchair ramp, have lowered your kitchen cabinets and counters, or widened hallways or doorways to accommodate a wheelchair, I think it would be very unlikely for the IRS to question the deductibility- those modifications don’t increase the value of a house. If anything, they lower the value. They might want you to prove that the bill was really for a wheelchair ramp and not a new deck, though.
To repeat what’s already been stated–
The IRS, in most cases, does not require proof of anything unless you are audited. I have a business and of course file a personal return, and I can’t think of anything that gets sent to the IRS besides the return except 1099s and W-2s–which are provided by the payer anyway. You must provide a SS# for dependents and spouses but I don’t think the IRS checks, as a matter of routine, who those people are or if the numbers are valid.
As far as being disabled, if you are, and there are deductions in the code relating to the expenses you incur, you can take them without providing proof of any kind AFAIK.
If you are audited, and you have either not incurred the expenses, or the IRS’s interpretation of what is allowable differs from yours, you may owe taxes.
I would think there are organizations that do advocacy for the disabled that can help you if you are confused by the tax code.
I am not a tax lawyer or accountant. What I write is based on my experience paying taxes.
IRS rules state that for the disabled classification for their purposes, they define the term as follows: What Is Permanent and Total Disability? A person is permanently and totally disabled if both 1 and 2 below apply. 1.He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 2.A qualified physician determines that the condition has lasted or can be expected to last continuously for at least a year or can lead to death.
As well as additional medical expenses available for the disabled, there is also a credit, completed on Schedule R, Credit for the Elderly or Disabled, that is available for low income taxpayers that are disabled. A physicians statement must be filed with the form.
The instructions for Schedule R gives more detail on what is considered a gainful activity.
Your IRS folk are mean! You can get the disability tax credit up here even if you are fully employed, as long as the condition has lasted or expected to last at least a year, and is one or more of several markedly restricting conditions (severe difficulty walking covers me nicely, since I’m paraplegic). I’m retired now, but I was working full time for quite a few years while legitimately getting it. To get it, you and your doctor fill in a form, the tax folk approve it, and then you never need to apply again for subsequent years unless the tax folk tell you to (they think maybe your condition might not be permanent, or they are checking for false claims and the like). I’ve never been asked to reapply.
ETA - And our basic deductions for medical expenses don’t even require being considered disabled for the purposes of the tax credit.
Thanks Nothar. I was wrong, not really a surprise…
It is worth pointing out that total and permanent disability is not required for every tax benefit. For example, a person in a wheelchair can still be employed and yet also able to take itemized deductions for medical expenses like the chair and a ramp. Itemized deductions are defined separately from T&P disability
I think everyone is forgetting the biggest tax benefit for the disabled: Disability benefits - welfare, worker’s comp, lawsuits, SSDI, etc. - are not taxable income (generally). Being able to exclude those items saves the disabled more in tax than all the wheel chair ramps and Sch R’s ever could. But each of these benefits is defined separately, whether by the SSA, a state’s disability rules, court settlements, insurance policies, etc. They are not defined in the Internal Revenue Code.
But can’t anyone take itemized deductions for medical expenses, as long as they exceed the limit?
Right. That was the point I was hoping to make - many of the tax benefits that apply to disabled people don’t require that you be disabled.
Indeed, which is why I was wondering about the point of the OP’s question: Where does the IRS need to know whether he is disabled? The tax code has so many rules about medical expenses and disabilities that the answer to his question depends on exactly what he’s asking about. In some cases he needs to show the IRS he’s disabled. In other cases they’ll take his word for it. In still other cases, such as the medical expense deduction, he doesn’t even need to be disabled.
In my training as a volunteer tax preparer (for senior citizens), our interview forms require that we ask the client if they or anyone in their household is disabled but we were told the responses are used only for statistical information by the IRS. It has nothing to do with the return itself.
Otherwise, as noted by Nothar above, any tax credits for the disabled requires a physician’s statement.
If someone in a household is T&P disabled, that can be significant. An adult relative (child, or even grandchild, nephew, sibling, etc.) can be a “qualifying child” for the dependency exemption, Earned Income Credit and some other tax purposes. In these cases, no documentation is submitted with the return, but you would want a doctor’s statement as part of the records in case there’s an audit.
It’s actually quite hard to qualify for the credit. But we’re still not sure what the OP wants, many ask this about some sort of Disability pay they get.
As to that- if they send you a 1099 or w-2, then it’s generally taxable unless the form sez otherwise.
The first time I went to the neurological clinic where I’m being treated for my migraines, I had to fill out a form that asked, among many other things, if I was disabled-YES or NO. The next question was “By who?”
Seemed like an odd question to me. Given the fact that I had been disabled ultimately as a result of a car accident, I decided to just put “Lucifer” down as my answer. 
The staff at the clinic didn’t share my sense of humor. 
I was asking mainly about income tax at both state and federal levels. At the federal level, it’s apparently meaningless–you don’t get a tax break just for being disabled according to one or two posters here. The state where I live is apparently more generous, and the good folks who do tax assistance for AARP were able to get a substantial refund from them. (I highly recommend this service, by the way, if like me you feel overwhelmed by anything more complicated than the 1040EZ form.)
Mainly I was concerned with documentation in the event of an audit. I retired at the end of September for reasons of health, although I took a regular pension. I made this decision because of multiple health issues, and I have various doctors who can verify that I actually have these conditions. However, I’ve never had a doctor just say outright, “You really should quit work.” I’ve applied for SSI disabliity, and while my lawyer says I have a good chance of getting it, the final decision won’t be until November or December. I figure an SSI ruling in my favor would pretty much make me bullet proof in an audit, but if I don’t get it I don’t know what my options are, should the state challenge my disability claim on the tax form.
I dunno, maybe I’m just really being neurotic here. The worst that can happen is that I’ll have to repay most of my state refund, but currently I’m living on a small pension and a few thousand dollars in savings until my Social Security kicks in. It would really be nice to know I can use that money in an emergency without having to worry about paying it back to the state.
Anyway, I want to thank everyone who replied. My mind is a little more at rest now.
Well, it is a meaningful question, as there is no universal definition of disability. The OP notes he is applying for SSI. The social security regs specifically acknowledge that they will consider different organizations’ findings of disability, but will not be bound by them. For example, the VA applies a completely different standard than ssa does. Same for private companies, states, etc. And who knows exactly what a doctor means when he/she opines that a patient is “permanently and totally disabled”?
The IRS language quoted above is curious because it closely parallels, but is not identical to, ssa’s. I would imagine that everyone getting ssa disab would qualify as disab for irs purposes, but the reverse would not necessarily be true.
BTW Lonesome, I presume you checked w/ your lawyer and your pension/savings do not exceed the asset requirements for SSI? I’m curious where you are in the disab process, as you expect a decision in 9-10 months.
Well, in the US, the SSDI payments (Social Security Disability Insurance), the sole source of annual income, is taxed.
I was considering itemizing the purchase cost/vets/food of my service dog, but didn’t because I didn’t want the chance of being audited. Not for a possible loss of the deduction, but for all the other crap.
ETA: post above mentions SSI. I believe he is referring to SSDI.