It is the opposite of winning the jackpot:  you open the letter from Social Security and find out that you owe them $10,000, $20,000, even $30,000.  

What happened?

There are several scenarios which may result in Social Security claiming an overpayment occurred; and demanding that you repay some, or all, of your benefits.

Sometimes, Social Security decides that you really weren’t disabled all this time. This is a reversal of the disability determination. Social Security previously thought you were disabled.  Now, they don’t! So, all that money that they paid you, they would like it back.  Now. 

The other set of facts I frequently see causing an overpayment is where you make too much money to receive any or all of your Social Security benefits. This typically happens in Supplemental Security Income (SSI) cases. In order to receive SSI, you have to be medically disabled (physically and/or psychologically) AND you also have to qualify financially. If you, your spouse or your family (if you are child under the age of 18), makes too much money or has too much in assets, you may no longer qualify for Social Security.

What frequently happens is the disabled individual works and makes too much money, or their spouse makes too much money, or they receive money or land as a gift or inheritance.  Sometimes it is a matter of simple arithmetic:  if Social Security only lets you make up to $940 per month (Substantial Gainful Activity threshold for 2008), and you make $1,200, they you should know that you may no longer be entitled for part or all of your SSI benefits.

However, it is not always that simple.  What if you are paid every two weeks? That would mean that some months may have two pay period and some months have three pay periods. During the three pay period months, your earnings may go up by a third, though your hours you work stay the same. This may mean that your income puts you over the SGA threshold for that month.

Another fairly common scenario is that you meet regularly, at least annually, with Social Security. You bring in your pay stubs and the Social Security technician reviews them. No one tells you that there is a problem and your benefits continue. That is, until 2, 3, 5 years down the line. Then Social Security tells you that your benefits should have been reduced or stopped because of your earnings and you now have to pay all that money back.  

Any of these situations can cause an overpayment.  

Click here to read other articles related to Social Security overpayments including what you can do about an overpayment and the standard of review.