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storslett10
New Member

Big tax bill. I got a "lump sum" Social Security payment from 2015 that increase my income by $10, 244. Turbo Tax seemed to consider this but the how the lump sum was treated

and the extent the 2015 payments were considered, was not explained.  I want to know if the lump amount reduced my tax amount in 2016
1 Best answer

Accepted Solutions
DianeW
Expert Alumni

Big tax bill. I got a "lump sum" Social Security payment from 2015 that increase my income by $10, 244. Turbo Tax seemed to consider this but the how the lump sum was treated

If you followed the steps for a Social Security lump sum payment then TurboTax did the calculations.  The way you can check is to do it both ways.

  1. First select "no" to the lump sum and then preview your Form 1040, line 20b (this amount changes).  
  2. Next go back to select "yes" and put in your information for 2015 and preview your Form 1040 again.
  3. My Account > Tools > View Tax Summary > Preview My 1040 (image attached)

Social Security Lump Sum:  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.

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 2016.  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. 

  1. If the tax is lower if it had been included on the previous year returns (ex. 2013, 2014 & 2015) there will be an amount added to the tax this year.
  2. If the tax is lower by including all of it on the 2016 return then that is where it will be taxed.

Check out the screenshots I have attached to help you.  You will need your previous year returns for some of the information.

You can go directly to the area to review your entry by following these steps.

1. Sign into your account and select your current return.

2. Select  My Account on the top right and then select Tools

3. Select Topic Search (see attached image)

4. Search for ssa1099 and select Go

5. Follow the interview to enter or review your entry for these benefits.

View solution in original post

1 Reply
DianeW
Expert Alumni

Big tax bill. I got a "lump sum" Social Security payment from 2015 that increase my income by $10, 244. Turbo Tax seemed to consider this but the how the lump sum was treated

If you followed the steps for a Social Security lump sum payment then TurboTax did the calculations.  The way you can check is to do it both ways.

  1. First select "no" to the lump sum and then preview your Form 1040, line 20b (this amount changes).  
  2. Next go back to select "yes" and put in your information for 2015 and preview your Form 1040 again.
  3. My Account > Tools > View Tax Summary > Preview My 1040 (image attached)

Social Security Lump Sum:  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.

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 2016.  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. 

  1. If the tax is lower if it had been included on the previous year returns (ex. 2013, 2014 & 2015) there will be an amount added to the tax this year.
  2. If the tax is lower by including all of it on the 2016 return then that is where it will be taxed.

Check out the screenshots I have attached to help you.  You will need your previous year returns for some of the information.

You can go directly to the area to review your entry by following these steps.

1. Sign into your account and select your current return.

2. Select  My Account on the top right and then select Tools

3. Select Topic Search (see attached image)

4. Search for ssa1099 and select Go

5. Follow the interview to enter or review your entry for these benefits.

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