SSDI Lump Sum 2023

[Daelyn]

I received a lump sum for SSDI from SSA for years 2019 - 2023 in February of 2023.  In January of 2023, we moved to a income tax free state. I believe I can take all of the lump sum for previous years in the year I received payment (2023) to avoid state taxes for the previous years. How will I do this in TT? 

[marctu]

Thank you for the question.  Your question starts with the premise that you know you must report the entire lump-sum in the year you receive it.  Generally, you use your current-year income to figure the taxable part of the total benefits received in that year.    

So currently, only eleven states in the U.S. impose some form of income taxes on Social Security benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. The other states and District of Columbia don't tax Social Security benefits. 

So assuming you moved from one of the states that does impose tax on Social Security, and were there for some part of January, you may need in the state interview questions exclude that income from taxation in one of the eleven states above in the State interview or depending upon the income allocation methodology for each of the 11 states, some of the benefit could be taxable. 

If you were not in one of the 11 states as of January 1, 2023, then none of this would apply.  You would more than likely would not have a state tax filing requirement in the state you left, if it is one of the 11 states. 

When you get working on your 2023 taxes, this is a great question for a Turbo Tax Live Expert.   We stand ready to help you when you file your 2023 taxes.   

[mbpeddie]

Hello Daelyn,

You received a Social Security lump sum payment for years 2019-2023. In TurboTax Online, a Social Security lump sum payment can be computed by following these steps:

• Follow these directions:
• Down the left side of the screen, click on Federal.
• Across the top of the screen, click on Wages & income.
• Under Your income, scroll down to Retirement plans and social security.
• Click on Show more to the right.
• Click on Start/Revisit to the right of Social Security (SSA-1099).
• At the screen Tell us about the benefits you received, enter the information as it is printed on the form.
• At the screen Did you receive any lump-sum payments?, click Yes.
• As an example, the year was 2019 and the amount was $5,000.
• You will have to answer questions about the 2019 tax return.
• Then answer questions about the 2020 and so on  tax return.

TurboTax will break down the payments into what amount was received for each preceding year.  You pay taxes on the lump sum in the current year tax return.

I hope this resolves your questions