This can be handled on your tax return for 2017. First we will handle the social security disability payments.
The Form SSA-1099 should show a total amount in box 5, and then the amount that is designated for each year in box 3.
There is a "lump-sum" method of reporting in this situation which is all done on the tax return for the year of receipt of the benefits. Enter the appropriate amounts for each year when you start that section of your return.
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The IRS has a special lump-sum distribution calculation that would allow you to be taxed as though the funds were actually received in the year to which they are attributable or as though it were all for 2017. The lowest tax result will be used.
Great news: TurboTax can walk you through that process and calculate the proper tax based on your entries.
- If the tax is lower if it had been included on the prior year returns there will be an amount added to the tax this year.
- If the tax is lower by including all of it on the 2017 return then that is where it will be taxed.
- Your SSA-1099 lump-sum section breaks down the payments into what amount was received for each preceding year. You can only enter one year at a time; when finished, click Add Another Lump Sum if you need to enter benefits received for a different tax year.
Click the images I have attached to help you. You will need your prior returns for some of the information.
If your benefits were used to repay any type of prior benefits you received (workmen's compensation, disability payments) follow the steps below to enter your repayment as a deduction on your return.
If the sum of the box 5 amounts on all your SSA-1099 forms, and your spouse's SSA-1099 forms if filing jointly, is used to repay for benefits that you reported as taxable income in an earlier year, see "Repayment of benefits received in an earlier year" in IRS Publication 915 . The instructions to enter your deduction is shown below.
- Click on Federal Taxes > Deductions & Credits [In TT Home & Biz: Personal > Deductions & Credits > I'll choose what I work on].
- Scroll down to the Other Deductions and Credits section and click on the Start/Revisit box next to Other Deductible Expenses.
- On the Less Common Expenses screen--
- If the repayment was $3,000 or less:
- Click the Yes box.
- Enter the amount on the Enter More Expenses screen.
If the repayment was more than $3,000:
- Click the No box.
- On the Any Other Deductions screen, click the Yes box.
- On Report Other Deductions, enter the amount in the box Claim of Right Repayment (Only If Over $3,000).
- Click Continue.
Click the images attached to enlarge and view for assistance.
