The Social Security lump sum payment process requires you to enter information from your previous years tax returns. Then the tax that would have been due from one or more prior year tax return is simply added to your 2021 tax return as an additional tax assessment.
For instance, in 2021 you receive $20,000 in Social Security benefits, $5,000 for 2021 and $15,000 lump sum benefit for 2020.
You enter the information from your 2020 tax return (DianeW777 was suggesting using IRS transcript information). The Social Security worksheets determine how much, if any, additional tax would have been owed. This additional amount due is added to your 2021 tax return for payment.
If, in 2021, you had also received Social Security benefits for 2018 and 2019, those years are computed in the same way and the additional tax that would have been owed is added to your 2021 tax return.
To report Social Security lump sum payments, follow these steps:
- Go to Federal / Wages & Income / Your income / Retirement Plan and Social Security / Social Security.
- Click Start / Revisit to the right.
- At the screen Did you receive any lump-sum payments?, answer Yes.
See also this TurboTax Help.
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