When figuring the taxable portion of social security
benefits, two options are available for lump-sum benefit payments:
The first option allows
the taxpayer to report the whole payment in the year it was received. When the
taxpayer chooses this option, complete the Social Security Benefits Worksheet
as usual by including the entire lump-sum payment on line 1.
The second option is
to treat the payment as received in the earlier year or years. This is done by
figuring whether any part of these benefits is taxable, based on the earlier
year's income. Any part that is taxable is then added to any taxable benefits
for the current year and included on Form 1040, line 20b. The taxpayer can
elect this method if it lowers the taxable benefits.
If you choose the second option, only the current year income will be adjusted. Do
not file amended returns for the earlier years.
After you enter your SSA-1099 information, TurboTax
will ask if you received a lump-sum Social Security payment. If you want to treat it all as taxable in 2018, just answer No and move on.
Otherwise, answer Yes and follow the onscreen instructions. Your SSA-1099
lump-sum section breaks down the payments into what amount was received for
each preceding year. You can only enter one year at a time; when finished,
click Add Another
Lump Sum if you need to enter
benefits received for a different tax year.
You will need information from your returns for the years that the lump sum covers.
