Repayment of Social Security Benefits in Subsequent Year

[Phantom101]

Hello,

My wife was receiving social security disability benefits that ended in 2020.  An overpayment amount of approximately $6600 occurred for the 2020 benefit period and we mailed a check in early December 2020 for the overpayment amount.  Due to postal service delays and the slow processing speed of the social security office, the check was not deposited until February 2021.  The 2020 SSA form was received in January 2020  and shows the entire amount of benefits for 2020 (amount of overpayment is not accounted for).  She will not be receiving any social security benefits anymore.  Will the social security office send a 1099-SSA form next year with the repayment amount shown?  How should I account for this overpayment?  Do I pay taxes on the overpayment this year and then claim a credit for next year?  Since the check was written in 2020 and the social security office waited until 2021 to deposit it, is it classified as having been repaid in 2020 or 2021?

Thanks,

Christopher

[DMarkM1 · Accepted solution]

You will need to report the benefits as shown on your 1099-SSA for tax year 2020.  Next year you will file for "Claim of Right" to recover taxes paid on the amount you paid back.  

Here is a link with helpful instructions for next year.

[merickson99]

My wife repaid in 202 disability insurance income received entirely in 2020. Would we still have to simply recapture taxes on that income? The amount returned is over $15,000. Why is it considered income at all?

[JamesG1]

You are saying that disability insurance income of $15,000 was received and repaid in 2020?

The issuer should correct the W-2 to reflect the repayment in 2020.  Have you discussed this with the insurance company?

Correcting the income is preferable to the IRS Claim of right repayment treatment on your tax return.

[merickson99]

The approval of social security disability happened in December. Various delays put our repayment after Jan. 1.

[MayaD]

If the repayment was done after January first of 2021, then you will report the repayment on your 2021 return.