We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?
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thecedarfamily
New Member

We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?

 
4 Replies
HelenaC
New Member

We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?

1). While your lump sum may include benefit payments for more than one year, you do not have to file an amended tax return for any prior year. You might need to pay taxes on a small portion of your lump-sum payment. However, you might be able to avoid these taxes by apportioning prior year benefits to those previous years’ income (still without filing any amended returns). See the example screenshots below.

After you enter your lump-sum Social Security payment information, TurboTax will automatically figure what if any taxes you owe due to the lump-sum payment.  

 A lump-sum payment is simply a one-time Social Security payment that you received for prior-year benefits. When someone is granted disability benefits, for example, they will receive a lump sum to cover the entire time since they first applied for disability; this period could cover months or years.  To enter your Lump Sum SSA-1099 form, click on Where do I enter an SSA-1099, SSA-1099-SM, or SSA-1099-R-OP1? 

2). Yes, you may be able to deduct lawyer fees, if you itemize and  if your payment to the lawyer was for the pursuit of taxable income listed below:

  • Pursuing taxable income on your behalf, or is working on a determination, collection, or refund of any tax. For example, if you’re going through a divorce and pay $1,000 to a lawyer who is working to secure alimony for you, you may deduct the $1,000. However, hiring a lawyer to gain custody of a child is not deductible.
  • Collecting disputed Social Security only to the extent that your benefits are taxable on your tax return (i.e., if 50% of your social security is taxable, 50% of the legal fees would be deductible.)  That likely would result in no deduction if your payment of legal fees was for social security disability payments.
  • Incurred while doing or working to keep your job. For instance, if you’re in a legal dispute with your company over unlawful termination, you could deduct the expenses as long as you’ve paid the fees you’re deducting and you’re deducting them in the year you paid them.

 To deduct certain legal fees related to taxable income: 

  • Type legal expenses, deduction in the search or find box, click search.
  • Click on Jump to legal expenses, deduction.
  • Continue with the onscreen questions.

Legal deductions are limited to 2% of your Adjusted Gross Income (AGI). Click on What is the 2% rule? for additional information.

Generally, you can't deduct fees paid for advice or help on personal matters or for things that don't produce taxable income. For example, you can't deduct fees for:

  • filing and winning a personal injury lawsuit or wrongful death action—the reason is that the money you win isn't taxable
  • settling a will or probate matter between your family members
  • help in closing the purchase of your home or resolving title issues or disputes (these fees are added to your home’s tax basis)
  • obtaining custody of a child
  • obtaining child support
  • name changes
  • legal defense in a civil lawsuit or criminal case that's not work-related—for example, attorney fees you pay to defend a drunk driving charge or against a neighbor's claim that your dog bit and injured her child.

 

sksfor88
New Member

We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?

The response states you may have to pay taxes on a small portion of the lump sum Social Security Payment however, when i entered the amounts for 2017, 2018 and 2019 it is showing the entire amount as my and my husband's income for the year of 2019. I went from a refund to now owing over $2,400 dollars. Did I do something wrong?  I don't see a way to enter the $6,000 lawyer fee.  Please help!

wroyce
Returning Member

We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?

My SSA-199 shows "*Includes $3,633.00 paid in 2020 for 2019. How do I deduct it? Thanks

MarilynG1
Expert Alumni

We file married filing jointly. Wife received social security disability & back pay for last 2 years. Does she get taxed on full amount and are lawyer fees deductible?

@wroyce Click this link for more info on Entering Lump Sum Payments from Social Security.

 

You might need to pay taxes on a small portion of your lump-sum payment. However, you might be able to avoid these taxes by apportioning prior year benefits to those previous years’ income (still without filing any amended returns).

 

TurboTax will guide you in entering this info. 

 

 

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