I was reimbursed by Social Security Disability for backpay. I had to give all backpay to the Long Term Insurance company. Do I pay taxes on backpay? Where is this in TT?

[John1461]

Note: I did initially pay taxes on Long Term Insurance income in other years.

[Anonymous_]

@Mike9241 

[John1461]

I did not see an answer in your reply. Did I miss something? Thank you!

[VolvoGirl]

Tagteam was just paging another user that might know to help.  

[Mike9241]

Whether Social Security disability benefits are taxed depends on your total income. You will avoid taxes if your total income—which is determined by adding one-half of your disability benefits to all other sources of income, including tax-exempt interest—is below the threshold set by the Internal Revenue Service (IRS). If you are single, the threshold amount is currently $25,000. If you are married and file jointly, it is $32,000. if your doing 2022 you'll receive a tax form SSA-1099 early in 2023. the gross amount that needs to be reported is in box 5. but whether it's taxable depends on the above.

now as to repayment to the insurance company

I want to make sure I understand your situation. Amounts paid by an insurer attributable to premiums paid by an employer and not included on your w-2 are taxable.  whereas payments attributable to premiums paid by the taxpayer including after-tax to an employer-sponsored plan and employer-paid premiums included in your w-2 should not have been taxable.

if not taxable- there is no deduction available for the repayment.

if the disability benefits from the insurance company were taxable then if the amount was $3,000 or more you have the option of taking either an itemized deduction (schedule A) for the repayment. you must be able to itemize for there to be a benefit. if so it's listed on line 16  as section 1341 repayment.  the other option which is usually the best is to refigure your taxes for each year you paid taxes on the benefits by excluding them and adding up the reduction in taxes, the total is taken as a tax credit on schedule 3 line 13z and listed as sec 1341 repayment credit.  you may need the help of a pro to recalculate your taxes for the prior years.  

[John1461]

I had been receiving 70% of my pay from my Long Term Disability Insurance Company for my disability. Once Social Security Disability approved my disability, they sent me back pay for all the months that my Long Term Disability Insurance Company had covered me. I had to send that check to my Long Term Disability Insurance Company. The months that I collected from my Long Term Disability Insurance Company, I paid taxes and filed as income. I am assuming that my Long Term Disability Insurance Company will send me some form (do you know the form?) that will show that I paid back the backpay that Social Security Disability paid. Where in Turbo Tax can I add this information because I am sure this with be atypical and not asked in the TT questions? Thank you so much for any guidance.

[fanfare]

the form is the letter or bill from the insurance company asking for repayment.

Keep that and a copy of your check with your tax records.

@John1461 

[esantoyo1]

Hello! What form did you end up filing? I'm in the same situation and have no idea what form to file. 

[DianeW777]

First, by filing your 1040, you will need to handle the social security disability and the included back pay on your tax return.  

If the long term insurance was NOT taxable income on your returns in the past, then there is nothing to recover as a 'repayment' of previously taxed income.    If it was taxable you can use the link below to choose the best method based on your situation.

• What is a claim of right repayment?

You can use the Social Security Disability (SSDI) lump-sum action to reduce the amount of your taxable social security, even possibly to zero.

• What is a Lump-Sum Social Security Payment?

Have all tax returns available for each year included in the lump sum payment (shown on your SSA-1099).

This can be handled on your tax return for 2024. The Form SSA-1099 should show a total amount in box 5, and then the amount that is designated for each year in box 3. Worksheet 4 is included after Worksheet 2 is completed for each year.

Be sure to select "lump-sum" method of reporting in this situation which is all done on the tax return for the year of receipt of the benefits.  Enter the appropriate amounts for each year when you start that section of your return. ‌Continue to add each year for all years listed in box 3. There is no amendment required.

1. Open your TurboTax return 
   • Search in the upper right ssa1099 > Click the Jump to.. link
   • Follow the screen prompts to select Yes for lump sum payments

Also enter a zero if your Social Security benefits weren't taxable or there were none in the earlier year(s) (such as for a spouse). 

If you are using the TurboTax Desktop version review the Lump-Sum Social Security Worksheet in Forms.  You can also review 'Earlier Year Lump-Sum Worksheet' for each year.  for TurboTax Online/Mobile use  Tax Tools:

• To find Tools: 
  • Sign into your TurboTax account and open or continue your return. 
  • Select Tax Tools in the left menu. 
  • You'll find Tools beneath Tax Tools.
  • Select View Tax Summary
  • Select Preview My 1040 (left panel)

@esantoyo1