Hi,
First, congratulations on getting that back payment.
You must include the taxable part of a lump-sum payment of benefits received in the current year (reported to you on Form SSA-1099, Social Security Benefit Statement) in your current year's income, even if the payment includes benefits for an earlier year.
However, there are two ways to determine the amount of income to include:
- You can use your current year's income to figure the taxable part of the total benefits received in the current year; or
- You may make an election to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year.
Here is a link from the IRS that gives you more detail about how to proceed if you select Option 2.
Please cheer below if you find this answer helpful.
Best,
Karen
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