I was wondering if someone wins a civil suit against someone and they end up receiving a 40,000 settlement does that have to be reported to the Social Secuity agency as an income.
With SSDI you do not have to report unless it is a workers' comp settlement.
With SSI you do have report. While SSDI is like getting an early retirement based on your work credits, SSI is technically a welfare program that depends on household income and assets. That money may be protected however by setting up a Special Needs Trust. You should try to find a local lawyer who can prepare one. This is a very special trust and is not something one should try to write on their own.
If you receive SSI, you do need to report this change in resources: SSA says:
"Tell us if there is any change in what you own." (see: http://ssa.gov/pubs/11011.html)
Your settlement will likely impact any SSI benefit. SSA says:
"Money, whether in cash or an account, is considered a resource in the month after it is received in most cases. Sometimes money does not count as a resource for a limited period of time but then becomes a countable resource if it is not spent within the given time limit."
Can you structure the settlement and retain entitlement? You should seek legal advice for a specific answer to that question. See the link below about Trusts and the other link for general information about SSI.
This does not apply to DIB benefits.
The answer to your question depends on whether the benefit is SSD(SSDI) or SSI. In most cases you get either SSDI or SSI but not usually both. This is important since SSDI is based upon your past work and the benefit is not based upon your current financial situation. On the other hand, SSI is a needs based program and any change in your income or resources affects your eligibility and the amount of the benefit. Therefore a $40,000 settlement would disqualify you from continuing to received SSI but not SSDI.