Retirement tax questions

According to the IRS: 

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.

You can select the lump-sum election method if it lowers the taxable portion of your benefits:

• Under this method, you calculate the taxable part of all your benefits (including the lump-sum payment) for the earlier year using that year’s income.
• Then you subtract any taxable benefits for that year that you previously reported.
• The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for the current year (figured without the lump-sum payment for the earlier year).
• Worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits can help you calculate the taxable portion using this method.

To report the "lump sum" method in TurboTax:  

• Search (upper right) for SSA1099  
• Click the Jump to ... link  
• Continue to enter your information and select Lump sum treatment 

Be sure to select "lump-sum" method of reporting in this situation.  You will have to calculate the taxable amount for each year separately, based on that yer . Enter the appropriate amounts for each year when you start that section of your return.   Continue to add each year for all years listed in box 3. There is no amendment required.

Be sure to enter zero if your Social Security benefits were not taxable or there were none for a particular year. If you are using TurboTax CD/Download, you can review the Lump-Sum Social Security Worksheet in Forms.  You can also review 'Earlier Year Lump-Sum Worksheet' for each year.  If you are using TurboTax Online, click the following link for instructions on how to review your return before filing.  How to Preview My Online Return Before Filing