lump sum social security payment

[rjs]

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@alexb757 wrote:

Correct me if I’m wrong, but isn’t the rule that you should use lump sum method if and only if, it gives you a lower tax liabity than the 85% method

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@alexb757 

I don't see anything in the IRS instructions that says that. You are free to use whichever method you choose, whether or not it saves you any money. Since you are paying tax on 85% of your benefits either way, the IRS is not likely to complain. I don't think you have anything to worry about.

[alexb757]

Sorry, I’m not sure you fully understand my question here.

my 2024 return shows ZERO lump sum since that did not come in to vent until 2025. That was the first year and most everyone is concentrating on the BBB with enhanced senior deductions and no tax tips and OT. No one is really focusing on lump sum payments for some 3 million people who were the only ones affected by this!

allow me to explain in more detail because many so-called tax experts and COAs seem unaware of the changes here.

in Jan 2025, Biden signed in to law a bipartisan bill from the previous year doing away with both WEP and GPO legislation affecting ALL government workers , whether federal, state or local. They set a date for retroactive payments starting January 2025 (even though some folks should have gone back further but that’s a different discussion) for the previous tax year, 2024.

Both my wife and I qualified and received lump-sum SSA payments in 2025 for the previous, earlier year - 2024. It’s all on the 1099-SSA in black and white. I was somewhat surprised I had to brief my TurboTax “expert” about this because he was, apparently unaware of the new rule and couldn’t find it on my docs submitted! Hardly a good look, I’m sure you’ll agree.

so, given all that, I instructed him to look at our numbers and see if it was more advantageous to opt for the lump sum method to lower our tax liability since we seemed to be eligible for the first time this past year. As I understand it, the whole purpose in doing this is to see if the lump sum method would LOWER your tax liability and if so, opt for that calculation instead if the standard 85% which we had the previous year and most people also have.

Having closely looked at our return and the 6a, 6b & 6c lines on the 1040-SR, we have our total, gross SSA benefits for 2025 listed on 6a, 85% of 6a printed on 6b, which is of course the taxable portion of 6a AND box 6c checked with an X. That means the lump sum method was used in this calculation and would normally be LESS than the straight 85% calculation, correct? I’ve read IRS Publication 915, Chap 11, an AARP article on this very subject and even spoken with a TurboTax CPA. All I require is a straight answer on why my taxable SSA is shown as 85% while at the SAME TIME the lump sum box is checked. Surely, it’s an either OR situation? Either it’s 85% taxed OR if the lump sum method shows a LOWER tax liability and you opt for that, then that LOWER amount is taxable and put on Line 6b. How can it be both 85% AND lump sum method? That makes no sense t me. It als made no sense to a CPA I spoke with today either!

And the other issues on TurboTax is once you sigh up for Full Service with a tax expert, once they file and the IRS accepts the return, the chat feature is immediately disabled! Why? I’ve had nothing but comms issues with the guy who did my return. I only spoke to him twice and now he’s leaving many emails because none of the calls are scheduled and he’s 3 hours ahead of me, it’s a big mess. I see my rights as a Full Service customer is that I should still be able to ask tax questions until Aprl 20. It’s very frustrating and I’ve spoken to 3 additional TT CPAs who are unable to fully answer hardly any of my questions. I truly regret being a first-time customer if this is standard MO. At least Liberty Tax gave personal face-to-face advice, instructions and answering any and all questions as it in previous years.

Aplogies for the long rant, but I’m having a real hard time jumping through the TT hoops that seem to be counterproductive. And having to explain my situation multiple times to different people…..

[alexb757]

Sorry, I’m not sure you fully understand my question here.

my 2024 return shows ZERO lump sum since that did not come in to until 2025. That was the first year and most everyone is concentrating on the BBB with enhanced senior deductions and no tax tips and OT. No one is really focusing on lump sum payments for some 3 million people who were the only ones affected by this WEP/GPO change in the law for 2025.

allow me to explain in more detail because many so-called tax experts and CPAs seem unaware of the changes here.

in Jan 2025, Biden signed in to law a bipartisan bill from the previous year doing away with both WEP and GPO legislation affecting ALL government workers , whether federal, state or local. They set a date for retroactive payments starting January 2025 (even though some folks should have gone back further but that’s a different discussion) for the previous tax year, 2024.

Both my wife and I qualified and received lump-sum SSA payments in 2025 for the previous, earlier year - 2024. It’s all on the 1099-SSA in black and white. I was somewhat surprised I had to brief my TurboTax “expert” about this because he was, apparently unaware of the new rule and couldn’t find it on my docs submitted! Hardly a good look, I’m sure you’ll agree.

so, given all that, I instructed him to look at our numbers and see if it was more advantageous to opt for the lump sum method to lower our tax liability since we seemed to be eligible for the first time this past year. As I understand it, the whole purpose in doing this is to see if the lump sum method would LOWER your tax liability and if so, opt for that calculation instead if the standard 85% which we had the previous year and most people also have.

Having closely looked at our return and the 6a, 6b & 6c lines on the 1040-SR, we have our total, gross SSA benefits for 2025 listed on 6a (and which also indicated the lump sum payments for 2024), 85% of 6a printed on 6b which is, of course, the taxable portion of 6a AND box 6c checked with an X. That means the lump sum method was used in this calculation and would normally be LESS than the straight 85% calculation, correct? I’ve read IRS Publication 915, Chap 11, an AARP article on this very subject and even spoken with a TurboTax CPA. All I require is a straight answer on why my taxable SSA is shown as 85% while at the SAME TIME the lump sum box is checked. Surely, it’s an either OR situation? Either it’s 85% taxed OR if the lump sum method shows a LOWER tax liability and you opt for that, then that LOWER amount is taxable and put on Line 6b. How can it be both 85% AND lump sum method? That makes no sense to me. It also made no sense to a CPA I spoke with today either!

And the other issues on TurboTax is once you sigh up for Full Service with a tax expert, once they file and the IRS accepts the return, the chat feature is immediately disabled! Why? I’ve had nothing but comms issues with the guy who did my return. I only spoke to him twice and now he’s leaving many VMs at random because none of the calls are scheduled and he’s 3 hours ahead of me, it’s a big mess. I see my rights as a Full Service customer is that I should still be able to ask tax questions until Aprl 20. It’s very frustrating and I’ve spoken to 3 additional TT CPAs who are unable to fully answer hardly any of my questions. I truly regret being a first-time customer if this is the standard MO. At least Liberty Tax gave personal face-to-face advice, instructions and answering any and all questions as in previous years.

Aplogies for the long rant, but I’m having a real hard time jumping through the TT hoops that seem to be counterproductive. And having to explain my situation multiple times to different people…..

[alexb757]

Not even when an AARP article where Lisa G-L, a CPA. and tax expert with TT says and I quote: if your income was more in 2025 (than in 2024), it would definitely benefit you to make that election. And I instructed my CPA to look into that and get back to me if it would be beneficial for us to do this. As soon as I paid and tax return was submitted and accepted, they (TT) disabled the chat feature, so I’ve not been able to get a straight answer in exactly how the calculation was made.

the article went on to say beneficiaries who received reduced SSA payments in 2024 due to the WEP-GPO recouped that money in 2025 via a lump sum payment from SSA and is clearly shown on the 2025 SSA-1099. I had to prompt my CPA tax expert to find that and tell him what the WEP-GPO was all about. Who is the expert here?

further the article goes on, because rpthese payments count as 2025 income, they could push some beneficiaries in to a higher tax bracket or increase the amount of their taxable SS income for the year.

this is exactly what happened to us and gave us a whopping total income of 172,677 - 33,017 more than for 2024. That year, there was no lump sum for SSA beneficiaries, it all started in 2025, affecting some 3 million beneficiaries, all in the same boat as us.

and yes, our income in 2025 was MORE than in 2024, so it would behove us to look at the lump sum election to LOWER our tax liability. I asked my TT CPA to look in to that but because the way TT Full Service is set up once you file, the chat feature is permanently disabled and you have to rely on random phone tags! Three times in the past 2 weeks he’s tried to get a hold of me, left a VM only once. While I have spoken to three other TT CPAs, none of whom could fully address my questions on this or another question and it’s almost impossible to communicate now.

i can’t even ask simple, non-complicated questions as a first-time user.

tell me this, what is the purpose of the lump sum method over the standard 85% for MFJ if not to possibly reduce yoyr tax liability? And if you’re going to do the 85% anyway, why also check box box 6c? Two fundamental questions no one has been able to supply an adequate answer yet.

i would not be having so many issues if communication were set up differently and chat option not disabled after you paid and return sent. BTW, yes, I know it’s in the Ts& Cs, but again, instead of pressuring me to file before Feb 28 and lock in the price, he could have also told me that tidbit of info and prevented some grief here. 
Seriously thinking of going back to face-face tax preparers. At least they would answer all your questions before, during and after filing, not cut you off and leave you hanging…….

[alexb757]

Sorry, incorrect on two counts.

First, there was No lump sum paid or calculated for 2024. It’s a new thing for 2025 for 3 million beneficiaries for the first time.All I have is AGI and taxes paid for 2024.

the SSA lump sum came in to being for the first time in 2025 for the previous year. For us, the lump sum was over 11k pushing us up to an AGI of 172k + (above the 150k threshold which also affected enhanced senior deductions for both of us).

again, there was no lump sum for 2024, just 2025, and what my TTCPA put in line 6a was total 2025 SSA benefits paid in 2025. That included the 11k lump sum. So it was NOT a combined sum from two different years, only one. He seemed a bit hazy on all this which surprised me, he being the expert…..I even had to point out where to find the lump sum payment on the submitted 1099-SSA which is really hard to miss with the asterisk in the bottom left-hand corner.

am finding it really difficult to explain all this and have repeated it to more than one CPA, most of whom shrug and say you need to speak with the guy who did yoyr return. I wish but the chat function has been disabled ever since I paid and the return was filed. Kinda leaves me hanging not to know how things were calculated, not seeing any worksheets (apparently you don’t actually use those, you just plug the numbers in the software and see what comes out). Is that software updated with ALL the new changes? I don’t know that either, I’m only the customer….

[rjs]

@alexb757 

You seem to be replying to different people, but no one can tell who each reply is addressed to unless you state it in your post. All of your posts just appear one after the other in what is now a very long, wordy thread. Endlessly repeating essentially the same lengthy message makes it difficult to follow the discussion.

As far as the tax on your Social Security is concerned, there is nothing special about the lump-sum payment for the WEP. It's the same as any other lump-sum Social Security payment.

There is no "85% method" for taxing Social Security benefits. Each year, anywhere from 0% to 85% of your Social Security benefits is taxable, depending on your other income. What the lump-sum election allows you to do is have the lump-sum payment for a prior year taxed at the same percentage as if it had been reported in the earlier year. But the lump-sum election does not necessarily save you any money. It may be that your 2024 income was high enough that 85% of the 2024 amount would have been taxable if you had reported it in 2024. If your income was high enough in both years that 85% of any Social Security would be taxable each year, the lump-sum election is not going to make any difference. Your tax will be exactly the same whether or not you use the lump-sum election. Even if your 2025 income is higher than your 2024 income, the lump-sum election is not going to save you any money if your 2024 income was already high enough to make 85% of your Social Security taxable. If the lump-sum election does not save any money, it makes absolutely no difference whether the lump-sum box is checked or not.

Most of the people who have replied to you in this thread are not TurboTax employees and cannot help you with your concerns about how Full Service works. You could try calling TurboTax support about that.

If you still have concerns about the lump-sum election, please state your question succinctly in one post. Everyone who is following this thread will see whatever you post.

[alexb757]

I have no access to any worksheet used and that’s part of the problem here. I can’t even contact the CPA that did my return and ask him. I’m not even sure that they use worksheets, I was told by another CPA it’s all plugged in to the computer and the software does it! Of course, I have no idea if that’s actually the case.

i simply do not have access to anything except my return from February 25.