How to handle repaid benefits not shown on 1099-SSA

[ecsplw]

I filed an application for retirement benefits with SSA in November 2024, and a few days later filed a request to withdraw. However, SSA deposited benefits totaling over $26,000 in my bank account before finally granting my request to withdraw four months later. I repaid the full amount of the benefits, and have bank records showing that SSA cashed my repayment checks. In the midst of all that, SSA  issued me a Form 1099-SSA  that does not reflect my repayment of benefits. Box 4 states NONE.

I have requested verbally and in writing that SSA issue a corrected Form 1099-SSA. To date, I have not received it.

My questions:

1.  Is there a way to file my tax return without paying taxes on the amount I repaid? If so, how do I best do that and lessen the chances of an audit or flagging by the IRS?

2. Is it better just to include the erroneous 1099-SSA in my return and pay taxes on the amount I repaid, and then file an amended return once I (hopefully) receive the corrected 1099-SSA?

Thanks in advance for your recommendations.

[DaveF1006]

No, here is how you report your Right of Repayment for the amounts you paid back to Social Security.

1. Go to federal>deductions and credits
2. Other deductions and credits>other deductible expenses
3. Scroll past the first screen and in the second screen, you may enter a social security payment of $3000 or less. Here enter $3000. Continue to the next screen.
4. Next screen asks if you have any of these other expenses. Say yes!!
5. Next screen you will enter $23,000 under Right of Repayment over $3000.

These are now reported on your return as itemized deductions.

[ecsplw]

Thank you, @DaveF1006 ! Just to clarify, two more questions:

1. In following your suggestions, I assume I do not report the 1099-SSA benefits payment in the income section of my return. Is that correct?

2. Is there a need to include any kind of explanation or additional documentation with my return?

[DaveF1006]

No, you still need to report the amount that is listed in Box 5 of the form. Additional documentation isn't required but do keep it handy if the IRS has questions about it at a later date. 

[ecsplw]

Thanks, @DaveF1006 . I believe I have followed your suggestions, but when I include the erroneous information from the 1099-SSA in income, and the right to repayment information in the deduction section, the amount of federal is the same amount shown in my initial version of my return, which showed only the erroneous payment, and did not include the information in the deduction section. After I entered the deduction information, I get the message that the standard deduction saves me the most. I feel like something is amiss.

[DaveF1006]

No, unfortunately, it is not amiss. The Right of Repayment is an itemized deduction, and unless you have other itemized expenses to report on your return such as mortgage interest, real estate property taxes, medical expenses in excess of 7.5% of your AGI, charitable contributions, etc., you won't be able to claim itemized expenses if your Standard Deduction is higher than your itemized.

Your saving grace is to request a 1099 SSA if the Social Security Administration will release it to you. I would recommend filing the return as is with the 1099 SSA and if you are issued the corrected 1099 SSA, you may file an amendment reporting the corrected 1099 SSA.

[ecsplw]

Got it. Thank so much, @DaveF1006 !

[ecsplw]

Hello @DaveF1006 et al, an update and a follow-up question:

I ended up filing an extension and today received a corrected Form SSA-1099 from SSA showing that we repaid the full amount the SSA had initially paid us, and thus received no benefits from SSA in 2024. I assume the IRS has received the corrected SSA-1099 as well.

When I file our joint return, is it appropriate to file electronically without an explanation, and proceed as though there was never an original incorrect Form SSA-1099? Or should I file on paper and include a copy of the corrected Form SSA-1099 along with an explanation?

Many thanks!

[CatinaT1]

You do not need to include an explanation, just use the corrected form. That is sent to the IRS as well.