ssdi lump payback

my wife has a disability policy she has been collecting since 2020. she applied for ssdi as required buy the insurance company. she was approved in 2023 and received a large backpay check from ssdi. her policy required us to repay that lump sum from ssdi back to insurance company. the insurance company and accountant said this large payment was not taxable as it was a repayment. now the the irs says we owe taxes on 70k in money we didnt get to keep. anyone have any irs info that states repayments like this are or are not taxable?

1738

Employee Tax Expert

Mar 31, 2025 4:51:37 PM

Unfortunately, the income is taxable. You need to claim a credit for the money paid back. The IRC 1341 shows as a credit on Sch 3, line 13b and carries to the 1040 line 31.

We follow the rules from IRS Repayment over $3,000. To do this in TurboTax, follow the steps in What is a claim of right repayment?

You will have to determine the change in tax over all years involved. The IRS pub has examples.

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ssdi lump payback