How to Capture Paying Back All of My Father's Social Security Benefits for Tax Year 2025

[zenmster]

1. My Father filed to collect social security on Jan 12, 2025

2. It turns out he withdrew $175,000 from his IRA in 2025

3. He has to payback all his Social Security Benefits for Tax Year 2025

4. How does he (actually me because I'm doing his taxes on TT) capture this in TurboTax?

5. For example, does he just report the fed taxes withheld but not the social security benefits (SSB) or does he include both the the taxes withheld AND the SSB amount and if so how does he account for the fact that he will pay all of his 2025 SSBs this year?

To anyone that can help, thank you in advance. 

z

[rjs]

If your father did not pay back any of the Social Security benefits in 2025, the repayment does not affect his 2025 tax return. He cannot report a repayment in 2026 on his 2025 tax return. On his 2025 tax return he has to report the full amount of benefits that he received in 2025, as shown on his SSA-1099. If he repays the benefits in 2026, he will be able to claim a deduction or credit for the repayment on his 2026 tax return.

It's not clear why he "has to" pay back his Social Security benefits. Taking a large IRA withdrawal does not require him to pay back his Social Security. It's not clear why you even mentioned the IRA withdrawal.

[zenmster]

According to the SS Office last Fri, his SSBs are reduced  $1 for every $3 he makes - and according to the SSN office a withdrawal from his IRA = income.  Again, according to the SS Office, his benefits are reduced as soon as he makes over $23,400.  He withdrew way more than that to the point, he was told he has to pay back all the SSBs he received in 2025.  Is that wrong information we were provided? 😮

[rjs · Accepted solution]

I think you got wrong information. It's possible that the person you spoke to misunderstood your question, or you might have misunderstood the answer.

People tend to get confused about two different ways that additional income affects Social Security benefits.

What you are asking about is the earnings test, which reduces the amount of Social Security benefits that you receive if you are below full retirement age and you work while you are receiving benefits. The earnings test applies only to income from working, not to investment income.

The other consideration that you hear a lot about is how much of your Social Security benefits are taxable on your income tax return. The amount of your Social Security benefits that is taxable depends on your other income. Additional income besides the Social Security benefits themselves can make more of the Social Security taxable, but it does not reduce the amount of the benefits that you receive. This applies to all types of income that are reported on your income tax return.

A distribution from a traditional IRA is reported as income on your tax return, and it will make more of your Social Security benefits taxable. But an IRA distribution is not income from working. As far as I can tell an IRA distribution is not included in the earnings test, so it does not reduce the amount of Social Security benefits that you receive.

Here are some sources that say that an IRA distribution is not taken into consideration for the earnings test, which means it will not reduce your Social Security benefits or cause you to have to repay benefits that you already received.

https://www.aarp.org/social-security/faq/does-401k-ira-count-toward-earnings-limit/

https://www.fool.com/retirement/plans/ira/do-distributions-count-as-income-for-social-security/

https://tra401k.com/news/case-of-the-week-the-social-security-earnings-test-are-ira-assets-earnings/

https://smartasset.com/retirement/what-income-reduces-social-security-benefits
Scroll down to "How Specific Income Sources Impact Social Security"

I can't find an official statement on the Social Security website that clearly and unambiguously says that an IRA distribution does not reduce your benefits. Some of the preceding sources reference this FAQ on the Social Security website, but the question does not specifically mention IRA distributions.

[zenmster]

The IRS gave me wrong info vs me misunderstanding. I specifically asked if my dad's benefits were affected by IRA withdrawals (the IRS rep even asked if any additional $ was earned via a job or self-employment).  

At any rate I called the SS office and corrections were made such that my dad's IRA withdrawals were not counted/treated as income.  Thanks!!!!