SSI/SSDI Backpay

[richfinley1]

I was recently awarded backpay with SSA going back to 2016 (I had a really long pursuit of disability, with denials, appeals, and then finally a fully favorable in Feb 2024). At the end of 2024, I received 113k in a lump sum payment from SSA. I had 34k in SSI benefits and then 79k from SSDI. My monthly benefit is very low and every year of backpay is broken down by year, with no year exceeding 18k. I made little to no money during the years of 2016-2024, so these small amounts would not have reached the level of needing to pay taxes for any of the years. But now with this lump sum payment, how do I handle this for my taxes? 

[rjs · Accepted solution]

You can use the "lump-sum election" on your tax return, which should significantly reduce your tax. It calculates how much of the benefit for each past year would have been taxable if you had reported it in that year, and then reports that amount as taxable on your 2024 tax return. On Form 1040 the box on line 6c will be checked, indicating that you used the lump-sum election.

When you enter your Form SSA-1099 in TurboTax, enter the full box 5 amount, and any other information from the SSA-1099, then click Continue. Two screens later it will ask whether you received a lump-sum payment. Select Yes and continue through the questions. You will need your tax returns for the earlier years. Enter the information for one prior year at a time. It doesn't matter what order you enter them in. After you answer all the questions for the first prior year you will come to a summary screen that says "Here's your lump-sum payment info." On that screen click the button at the bottom that says "Add another lump sum payment" and go through the same questions for the next year. Repeat this until you have entered all the prior years, then click Done on the summary screen.