How do I enter information for social security benefits repaid from SSA-1099-SM?

[dremy]

My income exceeded the maximum allowable income threshold and I had to repay the social security benefits I received.  I have received an SSA-1099-SM and trying to determine where to enter the information from box 4.

[DoninGA · Accepted solution]

You can only enter the amount from box 5 of the SSA-1099.  Box 5 is the difference between box 3 minus box 4.

[dremy]

Thanks for your quick response. I did not realize that Turbo Tax would accept a negative value from box 5.

[Weese]

So I do not get a credit somewhere else for Box 4 repayment

[DianeW777]

It depends. If you had to repay any social security benefits that you previously included in your taxable income then you may be able to take a deduction.  The repayment must be greater than $3,000, all of which was included in your taxable social security from a prior year. If there was no previous year taxable social security income, there is nothing to do.

Keep in mind it is only a deduction or credit if you actually included the social security in your taxable income in a prior year, greater than $3,000.

If the repayment is greater than $3,000 you have two options (option 2 is most common).

1. Credit: If you choose to use the credit instead of the income reduction, then you would have to calculate that manually.
   • The tax return would have to be completed in the TurboTax Desktop version if the credit is used.  For assistance with this, see: How to switch from online TurboTax to the TurboTax software? and TurboTax Prior Year Products.
     1. ​​​​​​​Figure your tax for 2024 without deducting the repaid amount.
     2. Refigure your tax from the earlier year (the year you originally reported the income) without including in income the amount you repaid in 2024.
     3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
     4. Subtract the answer in (3) from the tax for 2024 figured without the deduction (step 1)
2. Income Reduction Method (most common): If you choose to use the income reduction method you can use the TurboTax Online or TurboTax Desktop.​​​​​​​

Follow the steps below for the method you have selected.

Taking the Income Reduction in TurboTax

1. Login to your TurboTax account or open your tax return.
2. Click on Tax Home and then Deductions & Credits.
3. Locate the section Other Deductions and Credits (you may first need to click on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop version.)
4. Click Start (or Revisit) beside  Other Deductible Expenses.
5. A number of questions will appear on the upcoming screens. You are looking for the one that reads Claim of right repayment over $3,000. Click yes when you see this screen. (Be sure to ignore the similar question, repayments of $3,000 or less.)
6. Enter the amount of the repayment in the box Claim of right repayment over $3,000 and click Continue.

Taking the credit in TurboTax (less common)

There are two components to taking the credit in TurboTax. The first part requires determining the amount of the tax that was overpaid in the year the income was actually received. This requires using the TurboTax Desktop product (or another method) to determine what the tax liability would have been without the income. 

1. The credit can only be applied using the TurboTax Desktop product installed on a computer, in the Forms mode.
2. Switch to Forms mode by clicking on Forms icon in the program.
3. In the list of forms on the left click on 1040/1040RSR Wks above the Form 1040 itself.
4. Scroll down to Other Credits and Payments Smart Worksheet (near the bottom) and enter the amount that you have computed on Line E Claim of Right, IRC 1341 credit for repayments of prior year income.  (Schedule 3 and zoom right to the worksheet and easily entered)
5. Click on the Step-by-Step or Easy Step icon in the upper right corner to return to the interview mode and finish working on your tax return.​​​​​​​

@Weese 

[dremy]

Thanks for your assistance. I repaid a 2023 social security benefit greater than $3,000 in 2024.  I am using the desktop version of Turbo Tax Premier.

Based on a previous suggestion, I tried entering the amount from line 5 on the SSA-1099-SM as a negative value under Wages & Income in the Retirement Plans and Social Security section.  The federal tax due did not change.   I was wondering if this is a bug in the software.  The negative value is included as Social Security - nontaxable income and is subtracted from the Total Income.

Next, I tried the "income reduction" option you suggested, which also resulted in no change to the federal tax due.  I suspect this was because I am claiming the standard deduction.

Finally, I tried the "credit" option you suggested by calculating the 2023 federal tax due with and without the social security income.  I entered the difference in federal tax due on line D - Claim of Right, IRC 1341 credit for repayments of prior year income.  This option did lower my federal tax due by the credited amount. 

Did I interpret your suggestions properly? Do I still need to record the repayment amount as a negative value under 2024 Wages & Income?

[DianeW777]

Yes, you did interpret the credit properly.  No you do not need to record the repayment as a negative value under your 2024 income. The income reduction did  not change your tax because you used the standard deduction as  you noted.

You do not reduce your income when you take the credit.  There is nothing else to do now that you have the credit in place.

@dremy