SSDI lump sum backpay with a 10 year old onset date (I was awarded monies back before 2014)

[Stayfloating]

I have fought with SSDI (disability) for 10 years and was awarded in 2022 with an onset date of 2014. The 1099 from SSA shows an accurate amount paid out for 2018,19,20,&21 if indeed I was paid out during those years the proper amount we will round up to $12k per year. of what would have been paid out had I been receiving the money. 
Because it’s a lump sum payout they have paid me going back to

my onset date of 2014. However the year of 2022 has an amount of around $30k in addition to the 4 years previously mentioned. The years of 2014-2022 should be spread over 12k per year going back to 2014 IMO but they are trying to tax the lump sum…of course I am trying to spread out the amount accrued over each year which would make it untaxable. 
It’s below poverty line and we are talking about money I have paid in my whole life as a working adult. And because the IRS doesn’t make it easy to spread the money back to

the onset date (12k for 8 years prior to 2023) they want to

tax the money? Seems ridiculous at best considering it wasn’t me dragging the hearings out but SSA(SSI/SSDI). 

Is there a way to spread said monies out over the course of those years I was awarded for? (I filed no taxes save for one year of $0 to get covid relief). I was told to use 1077 but to be frank how they have this lump sum already spread over 4 years then a lump of 30k for 2022 seems like they just want to tax that 30k. Is there any way around this and can someone kindly direct me in the best route to take—I’d be eternally grateful. Thank you. 

[AnnetteB6]

When you are going through your return in TurboTax and enter your Social Security benefits, one of the questions on the following page is whether you received a lump-sum payment for a prior year as part of your current year payment.  You would answer 'yes' and go through the questions for each year shown on your Social Security statement.  

Doing this process for each prior year shown on your statement will determine what amount, if any, would have been taxable had it been included on those prior year returns.  Since you typically did not file a return for those years, the Social Security would not have been taxable and there should be no impact on your 2022 return as a result.

As for the lump sum paid that would be attributed to 2022, unless you had enough other taxable income on your return, the lump sum may not be taxable either.  It all depends on your filing status and your other income being reported.

For some additional information, see the following TurboTax help article:  

What is a lump-sum Social Security payment?

[Stayfloating]

Thank you very much. The problem I’m coming across is it will only allow me to put in any lump sum amounts for 2021 and not 2022 (and I’m just now getting back to this because I’ve been trying to contact the irs for a couple weeks about the year I became ill a decade ago). Why is this?

[MonikaK1]

A lump-sum payment is a one-time Social Security payment that you received for prior-year benefits. For example, when someone is granted disability benefits they'll receive a lump sum to cover the entire time since they first applied for disability. This period could cover months or years.

TurboTax will prompt you for the information needed in order to calculate any taxable amount.

After you enter your SSA-1099 information, TurboTax will ask if you received a lump-sum Social Security payment. 

If you did, answer Yes and follow the instructions. Your SSA-1099 lump-sum section breaks down the payments into what amount was received for each preceding year. You can only enter one year at a time. If you need to enter benefits received for a different tax year, select Add another lump-sum payment. 

You should enter amounts for all of the years covered by the lump-sum payment received in 2022. You can continue entering lump-sum payments in TurboTax Online for amounts received in 2022 for years prior to 2018. The instructions for this section indicate that it can go back to 1984.

Please see this help article and IRS Publication 915 for more information and instructions regarding reporting lump-sum Social Security payments. 

[Stayfloating]

When it breaks down the previous years that make up box 3 of the 1099 it says in turbo tax that these have been reported on previous years tax returns but they have not. It is very confusing. 

[DianeW777 · Accepted solution]

It can be confusing. Do not enter an amount of social security on the prior year return information since you did not have any before this year. The lump-sum election has always worked correctly in TurboTax. Have all tax returns available for each year included in the lump sum payment (shown on your SSA-1099).

• What is a Lump-Sum Social Security Payment?

This can be handled on your tax return for 2022. 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. All years 2014-2022 can be completed in 2022.

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 (upper right) > type ssa1099 > Click the Jump to.... Link
2. Select Yes you received benefits > Complete your SSA-1099 > Continue > Yes I received at least one lump sum payment for 2021 or earlier > Continue
3. Type a year from your SSA-1099 > Enter the amount received for that year > Continue
4. If you received a Form SSA-1099 for the earlier year enter the box 5 amount, if not enter zero or leave it blank > Continue
5. Enter the filing status for the earlier year > Continue > Select whether you lived with a spouse in the earlier year > Continue >
6. Enter the information from the earlier year return > Continue > Add another lump sum payment (another year from box 3) if applicable or Click Done
7. Continue to follow the screens until you are back at the Income Summary page

Also enter a zero if your Social Security benefits weren't taxable or there were none in the earlier year (such as for a spouse). If you are using the TurboTax CD/Download 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 review this link to look at your Form 1040 (line 6a): How to Preview My Online Return Before Filing

@Stayfloating

[Edited: 04/18/2023 | 1:38p PST]

[Stayfloating]

Shoot I didn’t refresh the page. So I’m using the app (I presume that’s the download). I appreciate the feedback. When I try to follow your directions it seems like it doesn’t break down each year clearly. Sorry, my brain doesn’t work like it used to...that’s not helping. So I’m putting 0 for earlier years because I didn’t file for them. And put another lump sum for each year for box 3?

So what time do you guys stop answering questions? Same question for help and support, which is what it is pushing me into when I sign back in?

[PattiF]

Yes, put a 0 in the box for the years that you did not file.  Use the amounts in the Description for Box 3 to enter the part of the lump sum that was received for each year. 

We are answering questions until 9 PM PST.  The example that @DianneW777 gave above shows how to enter the lump sum payment for each year.

@Stayfloating