My husband received four lump sum payments this year (2017) from SSDI for himself along with dependent benefits for our three children. The payments include benefits going back to 2015. We were required to pay these lump sums back to his former employers long term disability carrier this year which began paying him benefits in mid-2015. My question, how do we properly document this on our return this year? We received a letter from his former employers LTD insurance carrier including potential income deduction amounts. The letter also referenced IRS Publication 525, which we began wading thru attempting to understand the difference / benefits between taking a deduction vs. a tax credit? Do we simply include the amounts from net benefits received on form SSA-1099 for him along with our three children (all under 14) or just his SSDI benefits under income and then recapture this as an itemized misc deduction since he already paid taxes on long term disability proceeds from prior years?
Thank you for your time and any direction.
