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Q. I received a letter from disability saying that I received $2,400 in gambling winnings in 2021. I didn’t actually receive the winnings but I claimed them for a friend. How do I prove or explain to them so I don’t get my benefits suspended? I never received any of the winnings.
— Worried

A. No good deed goes unpunished, they say.

Before we get to your question, it’s important to clarify the effect that gambling winnings can have on disability payments.

There are two forms of disability-related benefits that are paid by the Social Security Administration (SSA).

Social Security Disability Insurance (SSDI) is an earned benefit that is based on an individual’s historical work record and payment of Social Security taxes, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge. Supplemental Security Income (SSI) is needs-based and is paid to those who have limited income and resources, but did not pay sufficiently into Social Security to qualify for SSDI, Mott said.

As you received a letter from Social Security about the winnings in 2021, we’ll go with the assumption that you are receiving SSI and not SSDI.

“Social Security requires individuals who receive SSI to report any changes to their income or other available resources by the 10th day of the month following the month the change took place,” she said. “Based on 2022 limits, the maximum amount of unearned income an individual can receive without causing an adjustment to their benefit is $861 per month.”

Gambling winnings are considered unearned income by the IRS and any amount over $600 will usually generate a 1099-G from the payer, Mott said. The sources of gambling income include such things as winnings from lotteries, casinos and raffles as well as gains from placing bets on horse and dog racing and sporting events.

The 1099-G is going to be sent to the individual who claimed the winnings and is tied to their Social Security number. The information will be passed from the IRS to the SSA, she said.

“With winnings of $2,400, the upper limit on unearned income would have been exceeded in the month you received the money and your benefit would likely be suspended,” she said.

One option to prevent the winnings from being counted against you would be to deposit them into an ABLE account, Mott said.

“These accounts were created in 2014 under the Stephen Beck, Jr. Achieving a Better Life Experience Act to enable an eligible individual to put aside tax-advantaged savings for the purposes of paying qualified disability benefits,” she said. “Given that the winnings belonged to your roommate, putting the similar value into an ABLE account may not have been possible.”

Now to your question.

There is an appeal process when an individual disagrees with a decision made by the Social Security Administration, Mott said. The form that must be completed is SSA-561, Request for Reconsideration.

“There are options for the appeal that enable you to provide the facts related to your case which may help the SSA amend their decision,” she said. “Given the circumstances you describe, meeting with a SSA representative via an Informal Conference may offer you a better option than just a Case Review.”

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This story was originally published on Jan. 5, 2023. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.

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