I’m from the government, and I’m here to help!

Occasionally, I have seen this idea floated around.  Since the IRS already has all our income data, what if the Service just prepared our tax returns for us and then sent them to us for review and editing?  Apparently, some European governments do this, an approach called “ready return”.  Around this time of year, when W2s and 1099s of all stripes not to mention all the lesser-used forms are starting to trickle in, the idea seems much more attractive than the annual scavenger hunt to locate all our own data, followed by the hours that many of us spend completing our 1040s and all the associated schedules.  Particularly when the frustration of filing a return is frequently exacerbated by the tax-software company’s or the tax-preparation firm’s constant attempts to either upsell us protection plans or charge us to use our own refund dollars to pay for the cost of the return preparation.  But then I remember that it is not in the government’s interest to get my financial data right in ways that favor me.

Even though I have not had the chance to test this out by receiving a “pre-filled” tax return from the IRS, I see it all the time with my clients who work and who also receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI.  When you work and also receive either of these disability cash benefits, the Social Security Administration wants to know how much you are earning on a monthly basis.  This is because the eligibility for both benefits and the amount your receive under the SSI program depend in part on your earned income.  There are multiple ways that you can report your income.  For SSI, you can either use the SSA’s mobile wage reporting app or call into an automated phone system.  For either program, you can fax or mail your paystubs to your local office, or you can upload them to your online My Social Security account.  When you first receive your benefit award letter, it includes information about the reporting requirements and methods. 

However, in 2025, the SSA started a phased rollout for using the Automatic Wage Information System through the Payroll Information Exchange.  Through this system, the SSA receives monthly wage reports for all people receiving benefits.  The SSA is encouraging all beneficiaries to opt in and allow the SSA to collect their monthly wage data in this way.  As an incentive, the SSA has promised that “you won’t have to worry about some penalties for mistakes”, which sounds good.  The problem is that the Automatic Wage Information System reports the topline gross monthly income as per corporate payrolls without taking into account any particular factors that may reduce how much of a worker’s gross income is “counted” by the Social Security Administration when they make a decision about whether a person is performing Substantial Gainful Activity or a decision about how much SSI the worker should receive that month.  For SSDI and SSI eligibility purposes and for SSI payment purposes, the SSA has internal instructions to count as income only compensation that it tied directly to the worker’s productivity.  This means that:

• Paid vacation, paid public holidays and paid sick leave should NOT be counted as earned income for either eligibility for either program or payment amount for SSI.  The automated system has no way of disaggregating compensation for shifts worked from compensation for paid time off.

• Bonuses that relate to a worker’s productivity or a contribution to the company’s bottom line should be spread out over the entire time period covered by the bonus rather than counted as income paid all-in-the-month when determining if a worker is performing Substantial Gainful Activity.  For example, if a worker receives in December a year-end bonus due to productivity, the bonus should be allocated equally across all pay periods from January to December of that year.

• Bonuses that do not relate to a worker’s productivity, but instead to some other event should not be considered earned income to the worker when measuring for SGA, even if the bonus shows up on the worker’s paystub.  For example, when Amazon® bought Whole Foods®, they gave certain long-time Whole Foods® employees a one-time stock bonus in the form of the cash value of the stock distributed through the employee’s paycheck.  This bonus was related only to the employee’s longevity, not to her/his productivity.

• Workers, who receive reasonable accommodations that result in lower productivity, may be able to reduce the amount of gross income that is counted for SSI and SSDI purposes.  These situations, known as “Subsidy and Special Conditions”, will not be captured accurately through the automatic system.  We will discuss subsidy further in a subsequent blog. 

• Workers who incur exceptional costs due to their disabling conditions may be able to reduce the amount of monthly gross income that is counted for SSI and SSDI purposes.  These costs, known as “Impairment Related Work Expenses”, will not be captured accurately through the automatic system.  We will discuss IRWE further in a subsequent blog.

• Payroll offices make mistakes.  The Social Security Administration also makes mistakes.  (After all, no system is perfect).  Relying on both doubles the probability that a mistake will occur in the reporting of your or your family’s income information.  Of course, individuals make mistakes, also, but the worker receiving disability benefits has a high incentive to double check, find, and correct mistakes.  Government and corporate entities have no such incentive.

Ronald Reagan is said to have believed that the nine most terrifying words in the English language are “I’m from the government, and I’m here to help.”  Regardless of your political leanings, if you have interacted with the Social Security Administration regularly, you may feel kinship with the former president in this regard. 

I do believe that the SSA’s move to obtain monthly income data for beneficiaries through the Automated Wage Reporting System is a genuine attempt to make life easier for both the beneficiaries and the SSA employees.  If you are a working beneficiary whose average monthly gross income is well below the Substantial Gainful Activity level and who experiences none of the above situations, you might be comfortable with the “set it and forget it” approach of opting in to the automatic reporting system.  Otherwise, the best way to make sure your data is reported correctly is to do it yourself.