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Old 06-10-2019, 04:50 AM
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Tax treatment of social security lump sum payment

After many rounds of denials and appeals, my wife was awarded a lump sum Social Security disability benefit amount of approx. $70000 which she expects to receive in June this year. One-third of this amount can be attributed to each of the 3 prior years of 2016, 2017 and 2018.
In addition, she started receiving regular Social Security disability payments in Jan. of this year.

For better tax planning purposes, I would like to estimate how much of this $70K would be taxable on our 2019 return and whether this lump sum amount affects the taxable portion of her Social Security payments received in 2019.
Is there a website where I could plug in some numbers and get a rough estimate?

Finally, I would like to know if we need to amend our 2016, 2017 and 2018 returns.



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Old 06-11-2019, 12:12 AM
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For better tax planning purposes, I would like to estimate how much of this $70K would be taxable on our 2019 return and whether this lump sum amount affects the taxable portion of her Social Security payments received in 2019.========>>it depends; say, If you or your spouse have another source of substantial income, it's likely your SSDI benefits could be taxed by the federal government. Say, If you file your taxes as an individual, and your income is more than $25k per year but less than $34k, you would have to pay taxes on about half the value of your benefits. If you are married and you file jointly, you can have a combined income of up to $32k before having to pay taxes on half your benefits.
If you are single and you make more than $34k or married and make more than $44k, 85% of your benefits could be taxed.plz go and check the website below


https://www.irs.gov/pub/irs-pdf/p915.pdf
you may follow the instructions of Worksheet A. A Quick Way To Check if Your Benefits May Be Taxable
I guess many TPs wonder about the tax implications of receiving this lump sum. While you might have to pay taxes on a small portion of your lump sum payment from SSA, the IRS does not penalize disability beneficiaries for receiving past-due benefits all in one year of 2019. Disability backpay can bump up your taxable income in the year you receive the lump sum payment from Social Security, which could cause you to pay more in taxes than you should have to. So,TPs can apportion past-due SSDI lump sum benefits to previous years, thus lowering or eliminating the taxable amount of their lump sum per year, without having to file amended tax returns.

Is there a website where I could plug in some numbers and get a rough estimate?=========>>as given above; https://www.irs.gov/pub/irs-pdf/p915.pdf


Finally, I would like to know if we need to amend our 2016, 2017 and 2018 returns.========>
As mentioned above; SSA sends you a form , SSA-1099 each year you receive benefits. If you're receiving this form for the first time, it should state in Box 3 the exact amount of your lump sum that was accrued during previous years. Each year will be listed separately alongside the total amount paid for that year. Rather than requiring you to file amended returns for 2016,2017,2018 years, the IRS allows you to handle it all on your current tax return, using prior years' income amountsIf your backpay and income are over those amounts as mentioned above, the IRS will allow you to allocate your past-due disability benefits to the year you should have received them, and you don't have to "amend" your prior year tax returns to do it



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Old 06-13-2019, 05:43 AM
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Great! Thank you for your reply!



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