Can My Severance Pay, PTO & Vacation Pay Show Up As Earned Income?

Aug 2 2020 - 10:43am

Hi Larry I started receiving widow's social security benefits January 2019. I just received a letter stating that they cannot pay my benefits from January 2019 through April 2019 because I was working. I was not working. I was on temporary disability collecting New Jersey short term disability and disability through the company that I worked for. I was given severance compensation, paid PTO & vaca and am wondering if this can show as earned income?
When I applied to social security I asked the question can I receive temporary disability and widows benefits and was told yes and now they are looking for me to return $10k. Please advise. Thanks so much.


Yes. Any compensation you received for which you received a W-2 form would likely be considered as earned income for purposes of the Social Security earnings test, but if you last worked in 2018 then anything you were paid in 2019 could likely be excluded from counting toward the 2019 earnings test. Social Security refers to that type of compensation as a special wage payment (SWP), and they use a specific form (i.e. SSA-131) to document that type of payment:

Based on your description, it sounds like you can probably get Social Security to remove the overpayment that you've been notified of by having your former employer complete a form SSA-131 and submitting in to Social Security. It might work best to start out by calling Social Security to explain the circumstances, though.

Best, Jerry