You have a few issues going on here. The best place for you to go is to speak to a tax specialist (accountant or tax service). Normally, Social Security Disability benefits are taxed a certain way and workers compensation is not taxed. However, if Social Security lowers its payments to you because of workers compensation, even though Social Security pays you less, they tax you on the total amount of Social Security - its almost a hidden tax on workers compensation for people who can least afford it. I hope this begins to help you out and I wish you the best of luck.
EVERY case is different. The answers provided here are general and not related to the specifc facts of your case. I am not your attorney and if necessary you should seek legal counsel.
My colleague is correct. Talk to a tax preparer and see what you need to do. It may be as simple as swearing out an affidavit, or requesting a corrected 1099 from SSA (but don't hold your breath for that to be correct either), or it may involve writing to your ex-husband's Social Security attorney or workers' comp attorney to get a letter about what is going on and filing that with your tax returns.
If the checks are direct deposited, that leaves a nice paper trail for what you are actually receiving. If you get checks, start keeping a copy of all checks. And, you can ask you local SS office to send you a letter verifying how much you actually got for the kids (as opposed to what they think you should get if your ex-husband was not getting workers' compensation benefits.
Any lawyer who handles SS cases has LOTS of stories about SSA's incorrect 1099 forms. They almost always report the gross amount of SS benefits you are supposed to receive, not what you actually receive, and they rarely calculate either workers' compensation offset or attorney fee issues correctly. I guess the good news is that the IRS should know that.........
Hope that offers some help. Meet with a tax preparer sooner rather than later. Good luck to you.
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It sounds like your Tax Preparer gave you advice on your discrepancy. Following up with the SSA for clarification/correction of your 1099 is also a good idea.
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