Social Security Disability (SSDI) applicants can increase their chances of getting approved for benefits while on Social Security Disability by hiring legal representation in the form of a SSDI lawyer. Many applicants may hesitate to do so, worrying about how much it would cost them.
But there is nothing to worry about. The fees of your SSDI lawyer are on a contingency basis, meaning that they will only receive their fees if you win benefits. Additionally, their fees are paid directly by the Social Security Administration (SSA).
Read below for a complete breakdown of how much an SSDI lawyer would cost and to understand how SSDI lawyers get paid.
SSDI Lawyer Cost Breakdown
This section breaks down each and every cost that is associated with hiring an SSDI lawyer.
Representation Fee
There is no initial fee for hiring an SSDI attorney. Payment to your lawyer is contingent upon the Social Security Administration’s acceptance of your claim.
In most cases, the first step is a no-cost consultation. The next step, if you choose to proceed, is to sign a contract for a fee that is contingent on the outcome of the case. Your attorney then sends the necessary paperwork to the SSA for final approval.
The Social Security Administration must accept the arrangement before your lawyer can collect the contingency fee. Currently, the average rate is 25 percent of your initial benefit payment.
The amount that the SSDI lawyer will actually get is dependent on the total amount of the initial benefit payment, which is established by the “back pay.”
We’ll discuss back pay in further detail down below, but in a broader sense, The SSA “owes” you additional money for the amount of time you could have been receiving benefits but weren’t because your application was undergoing review; this is referred to as back pay.
When your claim gets approved, you’ll receive all of your “due benefits,” and your attorney can collect up to 25% of those funds (for a maximum of $7,200).
The one and only exception to this rule is if your case is appealed at the federal level after it has been heard by an administrative law judge (ALJ), at which point the attorney’s fee will be 25% and there will be no upper limit.
Few people bother to challenge their ALJ’s decision; therefore, most disability claims are dismissed at that point.
Due to legal restrictions that cap how much Social Security Disability attorneys can charge in the form of a contingency fee, there is no difference in the fees charged by different attorneys. Not only that, but your attorney will not receive any portion of your future earnings.
Documentation Costs
Copies of your medical records proving your impairment may cost you money. Costs might vary from state to state and might encompass things like searches, pages, certifications, x-rays, microfilm, and more.
It is against the law for healthcare practitioners in some areas, such as Alaska, Idaho, and South Dakota, to demand payment from patients for copies of medical records.
The maximum cost for applicants in other states should amount to $250. Most attorneys will wait to collect this fee until after their clients have been awarded disability benefits.
If your disability attorney requires up-front payment for things like document copies, they are required by law to hold the money in a trust account. Then, they must notify you of any withdrawals and repay any leftover funds after the case has concluded.
If your disability attorney has to travel for any reason, like attending a hearing, they may add those expenses to your bill. However, they will likely file a claim with the SSA for reimbursement of those costs.
If you appeal your disability claim, your attorney can also request payment under the Equal Access to Justice Act (EAJ). This is another cost covered by the government.
Legal Fee Limits
The maximum amount an attorney can collect from Social Security is 25% of your back pay, or $7,200. Although attorneys can only charge a maximum of $7,200 for each case, most receive significantly less. (One survey revealed that the average disability attorney charge is roughly $3,750.)
The Social Security Administration usually takes 25% of your back-owed benefits and sends it straight to the SSDI lawyer.
Direct payment of fees saves both parties time and energy by eliminating the need to send invoices and wait for payment from clients. However, lawyers need to submit a fee agreement to the Social Security Administration in order to receive a direct payment from their client’s back pay.
A contingency fee arrangement means that neither you nor your lawyer will receive any payment from each other unless you actually end up winning your case.
It’s common to refer to fee agreements as “two-tier agreements” since they cover two distinct possibilities:
Benefits are paid out at or after the hearing. Fees in this scenario will be calculated according to the standard scale (25% of back pay up to a maximum of $7,200).
You’ve decided to appeal an unfavorable hearing decision to the Appeals Council or a federal court. Instead of agreeing to the typical percentage of the award as a contingency fee, your attorney can then petition the SSA for an additional fee.
A provision stating that an attorney may submit a fee petition to the SSA in cases where they have carried out a great deal of work on a client’s case is often included in the majority of conventional fee agreements.
When a Lawyer Might Request a Larger Fee
There are a few exceptions to the $7,200 maximum fee that could allow your lawyer to collect more in fees. If this is the case, your attorney will need to file a fee petition with Social Security requesting payment of fees in excess of the threshold.
Some instances are as follows:
- You dismissed your attorney and acquired the services of a new one.
- Your attorney took your case all the way to the Appeals Council or federal court after the disability hearing board rejected your claim for compensation.
When a client hires another attorney and the former lawyer does not “waive fees” (agree that they will not charge a fee), a fee petition may be necessary.
If this is the case, the existing disability attorney must submit a fee petition to Social Security so that the money can be divided between the two lawyers working on the case. Social Security may allow a greater charge than $7,200 if both attorneys put in substantial time and effort.
Even if you’ve retained the same lawyer throughout the entire Social Security Disability appeals process for your benefits, once your case is heard in a federal district court, different guidelines will be used. Your legal fees will likely exceed $7,200 because there is no cap on fees in federal courts.
However, the Equal Access to Justice Act (EAJA) may allow you to have the federal government cover the cost of your legal representation. Find out how much it will cost you to take your disability case to federal court and read more on EAJA fees so you can be prepared.
How is SSDI Backpay Calculated?
Back pay is usually calculated while the Social Security Administration investigates your claim. The Social Security Administration calculates your monthly benefit and back pay for the time period that passed between the beginning of your impairment and the approval of your benefits.
Dates are crucial for calculating back pay.
Imagine your arthritis was so bad on September 15th, 2021, that you couldn’t go to work. You submitted your Social Security Disability Insurance application on October 1st, but your application was denied. You filed an appeal, and an administrative law judge heard your case.
The judge sided with you since you presented new information at the hearing showing that your disability began in September 2021. Your work record indicates that you are eligible for a monthly SSDI payout of $1,300. But here we are in January of 2023, and you still haven’t received a payment in well over a year.
Back pay can help with that. Your “onset date,” which is what the Social Security Administration refers to as the date you first became disabled, was fifteen months prior to the Social Security Administration’s decision to eventually approve your disability claim. There is a five-month waiting period before you can receive SSDI payments, so you should receive 10 months’ worth of back pay.
Once an SSDI claim is granted, the back payments are normally paid in one lump sum and within 60 days. The Social Security Administration will deduct the cost of any legal or other kinds of representation from your back pay if you are approved for disability benefits.
Is Back Pay Taxable?
If your total payment is higher than the threshold that determines whether or not you are subject to income tax, then some of your Social Security disability back pay may also be taxable.
A “lump-sum election” allows you to recalculate back pay that accumulated in the year before into that year’s income for tax purposes, thereby reducing the likelihood that a substantial payment may cause you to incur tax consequences for having your income above the threshold.
In addition to the information provided in Box 3 of your SSA-1099 tax form, you may find it helpful to read the instructions provided in IRS Publication 915, “Social Security and Equivalent Railroad Retirement Benefits,” for allocating back pay to prior years in order to minimize your tax liability. However, if you decide to make a lump-sum election, the math is complex, so you have the option to use tax software or get professional help.
Benefits of Hiring a Disability Lawyer
Following are some benefits of hiring a disability lawyer:
Paperwork
With the assistance of your attorney, submitting the necessary paperwork and applying for Social Security Disability benefits will be a breeze. This phase of filing a claim takes a long time and is difficult.
The Social Security Administration published a Blue Book to aid in qualifying for SSDI based on medical conditions and criteria that must be met. The medical impairments discussed in this book are among those considered when deciding whether or not a certain condition constitutes a disability.
Your attorney will need to investigate the extent of your condition and evaluate it against the criteria set forth in the SSDI Blue Book. If you file a disability claim, it will be their responsibility to verify that you fit the Blue Book’s criteria and that your medical condition qualifies as a disability.
Your lawyer will need to collect all relevant documentation to begin working on your claim. These include:
- Personal details
- tax returns
- Forms and documentation from bank accounts
- Referrals and medical records
- Prescription drug profile and history
- Work history
This documentation is essential for the Social Security Administration to review in order to determine eligibility.
In the absence of this documentation, the SSA will be unable to evaluate your application for benefits fairly.
Tracking
Your Social Security Disability lawyer will monitor the progress of your case throughout the entire procedure.
They can advocate on your behalf with the SSA staff to keep your application in motion. In the event that any issues emerge, your attorney is going to be ready to address them and communicate with their representatives on your behalf.
Assistance with the Appeals Process
If you are denied disability benefits, a Request for Reconsideration of a denied Social Security Disability claim must be submitted within 60 days of the denial letter’s date. During the appeals process, having legal representation may be crucial. It will be up to your lawyer to acquire fresh proof to demonstrate your impairment to the SSA.
They won’t settle your claim unless you provide the latest medical or financial records.
You have 60 days from the date of the denial of your request for reconsideration to file a request for a hearing before an administrative law judge. It can take as long as two years. The hearing stage is where your approval odds really start to rise.
Having a lawyer on your side to help you establish a strong case, collect evidence, and advocate for your claim’s approval might be crucial, depending on your situation.
Conclusion
Now you know exactly how much hiring a disability attorney will cost you. It is possible that hiring legal representation may increase the chances of SSDI approval. And on the positive side, it will not even cost you anything if you end up getting denied benefits.
