Tax Law (Questions About Taxes)/Disability & Taxes


QUESTION: Good morning - I have a question and I hope you can help me.  I've been on disability since 2007 and therefore have not had to file a tax return in a while.  I got a statement in the mail the other day from my former company stating I had almost $14,000 in a retirement fund and it had gained $500 in interest this year.  I never even remembered I had this.  I had cashed out my 401K long ago and never realized there was other money there.  Then the next day I got a statement for a credit card I was unable to pay and it was a tax form for a $5000+ write off.  Do I need to file a return for these 2 things even though I am on disability?

ANSWER: Bonnie,

Disability does not excuse you from paying taxes on your income.

The credit card debt is cancellation of debt income, reported on line 21 of your 1040.  

The retirement fund and interest are not income until you withdraw it, assuming it is a qualified retirement plan.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: I guess I should have clarified that my only income is social security which as far as I know is not taxed.  If I'm wrong then I'm really in big trouble because I've not filed in 7 years.

Sorry you thought my previous answer was presumptuous and discourteous, I was merely responding to your question and did not mean any offense.

If social security is your only income, you are not required to file a tax return.  When you have additional income, it is combined with your SS to determine if any of it is subject to taxation.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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