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Level 5

Lumpsum ssdi - Amending returns will help us because we were in a lower tax bracket before getting the lumpsum

If we amend returns we stand to gain.  The IRS method or the same adopted by TT does not help us.  Since we were in a lower tax bracket the previous year (2018), adding SSDI income for 2018 to 2018 income and amending the return would help us.  This year (2019) we will be in a higher tax bracket - thereby we would pay a much higher rate for 85% of SSDI lumpsum.  While IRS provides a method to distribute the lumpsum, we fall in the 85% of ssdi taxable amount anyway.  But distributing the lumpsum to the right years will help. Does IRS allow amending returns or the only option is to include everything in 2019.  This is in preparation for making tax payments correctly by adjusting deductible taxes on salary (self) and ssdi (spouse).  12% vs 22% is a big difference.  Also what about attorney fees?  Is it true that ssdi recipient pays taxes on attorney fees too?

4 Replies
Level 16

Lumpsum ssdi - Amending returns will help us because we were in a lower tax bracket before getting the lumpsum

If you get the lump sum in 2019 then it is reported on the 2019 return ... the SSA-1099 will have the breakdown of how much for what tax year  in the lower left corner of the reporting form.  Follow the interview screens slowly and carefully to determine the taxable portion to be reported on the 2019 return.  

As for the attorney fees ... https://ttlc.intuit.com/replies/6640741

Level 16

Lumpsum ssdi - Amending returns will help us because we were in a lower tax bracket before getting the lumpsum

And misc deductions subject to the 2% AGI limitation have been suspended from 2018-2025.
Level 20

Lumpsum ssdi - Amending returns will help us because we were in a lower tax bracket before getting the lumpsum

@Critter#2 does the "10 year averaging" apply here? I'm not sure as I'm not well versed in that area. Just trying to jog your memory, just in case.
Level 16

Lumpsum ssdi - Amending returns will help us because we were in a lower tax bracket before getting the lumpsum

no not at all for lump sum SS payouts