lump sum from ssdi

[Krishnapriya1]

My question actually will apply to next year, but I need to plan.  In 2018 I my marginal tax rate was 12%.  In 2019 we received a lumpsum payment of social security disability that includes payments for 2018.  In 2019 because of this lumpsum payment we will be in the 22% marginal tax bracket.  While 85% of benefits are taxable, if I distribute disability income between 2018 and 2019, I will be saving over 1000 dollars in federal taxes because of this 10% difference in marginal tax bracket.  I do not see anything that allows me to amend my return.  All those lengthy calculations are to see if the taxable SSDI would be lowered.  It does not see if the actual taxes are lowered.  AT least that is my understanding after reading pub 915.  Can someone tell me if I understood right?  Thanks in advance

[Kat]

According to the TurboTax FAQ below, the TT program will allow you to allocate the lump-sum payment to both 2018 and 2019.  This will help on your tax situation, of course, but you'll also see that there is no need to amend your 2018 return.  

I believe the info in the FAQ will tell you all you need to know.  But if you still have further questions, please post back.

"What is a lump-sum Social Security payment?"

https://ttlc.intuit.com/replies/4767454

[Krishnapriya1]

I posted an issue with Systemic Advocacy Management System (SAMS).  IRS does not allow amendments for lump sum SSDI amounts.  While it does not hurt the low income or very high income people, it hurts people in the middle.  Someone from IRS actually got back to me in 5 days and I was quite surprised.  Did anyone file an issue with SAMS?  If so did you get a response and did they do anything about it?

[rjs]

Your understanding is basically correct. The lump-sum election potentially reduces the taxable amount of the benefits that you received in 2019. After you go through the lump sum interview in TurboTax, TurboTax will determine whether the lump-sum election reduces your tax. If so, it will use the lump-sum election on your tax return. If not, it will just report it as if the payment was all for 2019.

The lump-sum election is your only option to reduce your 2019 tax. You cannot amend your 2018 tax return.

[Mike001188]

Hello,

I received a lump sum ssdi payment in 2019.  After allocating it over prior years in turbotax, when I enter the lump sum box 5 payment amount from the SSA-1099 do I reduce this amount I include in box 5a on my 1040 2019 return by the amounts I received in prior years?

[HelenC12]

No, you do not reduce your SSA-1099 form, Box 5, by the prior year lump-sum payments.

1. After you enter your SSA-1099 information, we'll ask if you received a lump-sum Social Security payment.
2. Answer Yes and follow the instructions. 
3. 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.
4. To enter benefits received for a different tax year, select Add another lump-sum payment.

After you enter your lump-sum Social Security payment information, TurboTax will automatically figure what if any taxes you owe due to the lump-sum payment.

For additional information, see the following: What is a lump-sum Social Security payment?

[germada]

I received a lump sum payment from SSDI in 2019 and paid this to the LTD insurance co. as a required offset payment.  It was greater than $10,000 and I did not benefit from this lump sum.  How do I deduct this amount from my taxable income in the post-2017 tax law?  What itemized deduction can I use?

[VictoriaD75]

You will have to pay taxes on the SSDI benefits. LTDI benefits are not taxed if you paid for them with after-tax income. Prior to 2018, you could deduct the offset payment from your taxes, but this is no longer possible due to the major overhaul of U.S. tax law at the end of 2017. The Tax Cuts and Jobs Act removed all the miscellaneous deductions you could claim on your Schedule A.

[M2020]

I'm posting this question here, hoping you can help, because I can't get a response on another forum.

My wife received a SSDI lump sum of ($81,714) in 2019 for the years 2016($24,318),2017($32,520),2018($24,876). We repaid the LTD company ($78,260.68) in 2019 as requested. In January 2020 we received a letter from the LTD company that we could take a deduction or credit on our 2019 taxes. The credits for taxable benefits paid prior to 2019 (as stated in the letter) were 2016($39,169.33),2017($48,624),2018($35,116). Total credits : ($122,909.33). My question is how and what amounts do I enter into the 2019 Turbo Tax Deluxe software.

[SusanY1]

If I understand you correctly, both the lump sum payment as well as the repayment to the Long Term Disability insurance company occurred in 2019.

If that is the case, here is how to enter this into your TurboTax Deluxe:

1. Enter the social security income exactly as it appears on Form 1099-SA - this goes in Wages & Income under Retirement Plans and Social Security.
2. After you enter this information, TurboTax will ask you if the amount was a lump sum that included payments for prior years.  At that time, you will indicate which amounts are for which year - just like you have laid the information out here in your question.  TurboTax will also ask you questions about your income and filing status for those years - so have your returns available.  You will need your adjusted gross income (AGI), tax-exempt interest, and taxable social security reported on each return (if any).  
3. After you have entered all of the income information navigate to Deductions & Credits and select "I'll choose what I work on." 
4. Scroll to the next to last option Other Deductible Expenses and click Start (or update.)
5. The third screen should ask you about other expenses that includes on the list Claim of right repayment over $3,000 - it will look like this:
6.  Answer yes on this screen.
7. Then enter the amount that you repaid on the line "Claim of right repayment over $3,000.
8. This will enter the deduction on your Schedule A and on Line 19 of your tax return.  

@M2020

[mlm15]

My question is what if you received the SSDI lump sum payment in 2020 (at the end) and the repayment to the LTD company wasn’t until 2021?

[JamesG1]

The Social Security lump sum payment is reported on the 2020 Federal 1040 tax return.  In TurboTax Online, a Social Security lump sum payment can be computed by following these steps: 

• 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 2018 and the amount was $5,000.
• You will have to answer questions about the 2018 tax return.
• Then answer questions about the 2019 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. 

The payment to the LTD company takes place in 2021, will be reported on the 2021 Federal 1040 tax return and will be treated as a claim of right repayment.  A claim of right repayment occurs when a taxpayer is required to repay income that they had reported and paid tax on in a previous tax year.  The repayment must be of funds that, when received, the taxpayer had a reasonable belief he or she had unrestricted access to.