I'll try to keep the short with only relevant information. Father filed for SSDI in 2015, passed away February 2017, I (his only child, no existing spouse, etc) continued the claim. Court ruled in my Father's favor Oct. 2018, finally issuing the lump sum funds in November 2019 (yes a year later). The funds were accrued from 2015 - Feb 2017 ending with his passing. Father had $0 income from 2015 -2017.
SSA-1099 was issued as follows:
James Doe O/A/O
John Doe DEC'D
James Doe (my) SSN in Box 2 for Beneficiary's Social Security Number
1099 says Benefits for 2019 in the full amount, doesn't break down years of accrual
When entering this info into Turbo Tax, it is saying I need to be taxed approximately $6,000.00 for these funds when they were part of his estate, and would have been taxed $0.00 because of his lack of income during this period of time. Am I missing something, or does this need to be filed a different way? I was assured by SSA several times after my fathers passing I wouldn't have to worry about Taxes on his portion as it's part of his estate if awarded and I need not be concerned with Voluntary Tax Withholding. There were a lot of issues SSA kept running into with my Dad's SSDI after his passing which prolonged the entire process, so I wouldn't be surprised if this 1099 was issued with errors/mistakes.
Please help if you can, I'm losing sleep over this.
Unfortunately, only beneficiaries (not those receiving on account of the estate) that earned the benefits on the SSA-1099 can spread the income across the relevant years (to take advantage of the $32,000 you can make without social security being taxable); however, as you state, the entire amount is listed, and it is not broken down by year in Box 3 like it would be if your dad had received it.
Did you make over $32,000 in each of the years in question? Know that even if those who receive on account of an estate were allowed to spread the income over the relevant years instead of being required to claim it all in one year, that the result would be the same if your earnings were over $32,000 in each of the years. Sorry for your loss.