If you are considering hiring an attorney to handle your Social Security Disability (SSD) benefits claim, you may have wondered how disability attorneys get paid. Luckily, SSD attorney fees are fairly straightforward, subject to limits imposed by the Social Security Administration(SSA), and are paid directly from any benefits you receive – not your own pocket.
Social Security Disability Fee Agreement
The SSA regulates the payment of SSD attorney’s fees. Before accepting your case, the attorney will have you sign an SSD fee agreement, which covers how the attorney’s fees will be paid, and how much that payment will be. The SSA must approve the fee agreement. The SSA requires that all SSD claims be handled on a contingency basis only – meaning if you don’t receive any benefits, your attorney doesn’t receive payment.
The fee agreement cannot contain any provision to the contrary. For example, an agreement that states the attorney will receive a minimum fee, regardless of the outcome, or that you must pay for his services up front, is invalid.
Determining SSD Attorney Fees
Federal law limits attorney’s fees in SSD cases. The maximum amount of attorney’s fees that can be collected in an SSD case is 25% of any back pay awarded, up to a maximum fee of $6,000 (there are a few exceptions which allow an attorney to receive an increased fee, as discussed below).
For example, if the SSA awards you $15,675 in backpay, your attorney will receive $3,918.75, which represents 25% of the backpay award. The attorney’s fee is deducted from your first benefits check. If you aren’t awarded back pay, even if your claim is approved, your attorney receives no payment (again, there are exceptions).
Although an SSD attorney is paid only if your claim is approved, you may be required to reimburse him for out-of-pocket costs associated with handling your case, regardless of the outcome. These costs may include amounts the attorney paid to obtain medical records, photocopying fees, postage, or fees required for expert testimony. The fee agreement should outline what costs and fees if any, you will be expected to pay.
When SSD Attorney’s Fees Can Exceed the Maximum
We mentioned that there are exceptions to the general rule that $6,000 is the maximum fees an SSD attorney can receive.
If your claim is decided by the appeals council or federal court level, your attorney may file a fee petition with the SSA requesting a larger fee. These higher-level appeals often involve multiple hearings and require a greater investment of the attorney’s time and resources, which justifies the higher fee.
An attorney may also file a fee petition requesting a higher fee if no fee agreement was signed, or if the agreement didn’t state that the attorney was accepting the case on a contingency basis. This situation is uncommon, as the majority of SSD attorneys only represent clients on a contingency.
When deciding whether to grant a fee petition, the SSA will consider:
- The extent and type of services provided
- The complexity of the case
- The attorney’s skill and competence
- The amount of time the attorney spent on the case
- The results achieved
- How high in the appeal process the case went and when the attorney took on the case
- The amount requested in the fee petition
If the SSA approves the fee petition, payment will be taken from your first SSA check.
Income Tax Deductions for SSD Attorney’s Fees
Depending on your income level, filing status, and your benefit amount, you may be required to pay income taxes on your SSD back pay award. The taxable amount is prorated over the number of years the back payment covers. For example, if 40% of your back pay award is attributed to the current tax year, you only have to report 40% on your tax return.
Likewise, the amount of attorney’s fees you may deduct is prorated at the same rate. For example, if your SSD attorney received $3,918.75 in fees, you could deduct $1,567.50 in the current tax year.
Are you considering working with an SSD attorney for your application for benefits? Get a complimentary case evaluation by calling #(847) 577-4476 or completing our online evaluation form today.