No. Do not subtract it out. You must report a lump sum payment in a year where it shows up on the statement (SSA-1099). For a year where a lump sum is paid, the Social Security Administration (SSA) includes the full amount paid in a tax year and then shows the breakdown of the amount that applies to each year.
Based on your information, in 2017 you received a lump sum that included amounts paid to you in 2017 for 2016. You must report the full amount in 2017 that is listed on your SSA-1099 in each box, then choose the lump sum method to determine the lowest possible tax for 2017.
If necessary, you should amend the 2016 return providing your statement for 2016 did not show a lump sum payment in box 3 for a payment in 2016, that applied to a prior year.
Instructions for amending a prior year return are included below.
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