It may be that claiming the 2024 lump sum at your 2025 tax rate is more beneficial than claiming the 2024 rate on that amount.
You will report your 1099-R (including the lump-sum) on your 2025 return, but you do have two options regarding the tax treatment.
1.) You can be taxed on all the income on your 2025 tax return at your 2025 tax rate
OR
2.) You can opt to pay the tax on your 2025 return, BUT AT THE RATE YOU WOULD HAVE PAID ON IT HAD THE INCOME BEEN PROPERLY PAID IN THE PREVIOUS YEAR(S).
If you have no tax on your Social Security Payments, it doesn't matter, but if the additional income puts you into a higher tax bracket, you might want to use that second option.
Basically you figure the tax you would have been charged on your 2024 return for that income and then pay that dollar amount on your 2025 return.
TurboTax can help you determine if this is advantageous for you.
Designate the 2024 amount as a lump-sum payment and proceed through the interview.
TurboTax will ask for certain numbers from your Tax Year 2024 Federal return (1040) such as the amount of Social Security you received in 2024 (line 6a) , 2024 taxable Social Security (line 6b) your Adjusted Gross Income (AGI, line 11) and if you had any Tax-Exempt Interest (line 2a)
You, however, ARE taxed on your Social Security Income.
If you went through this process, and the program is saying that you are in the 85% taxable Social Security for 2025, using 2024 might not be advantageous for you.
It sounds like, had that lump-sum been paid in 2024, you would have paid tax on 5,131 of that lump-sum income.
But for 2025, you would be taxed on 4,361 of that lump-sum, so it would be better to pay your 2025 tax on that lump-sum.
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