ProWeb: Social Security Lump-Sum Election

A lump sum Social Security payment is one that was paid in the current year as back pay for previous years. Depending on the taxpayer's current year AGI, this income may be taxable and should be reported on Form 1040.

Boxes 3 to 5 of the taxpayer’s 1099-SSA are relevant:

• Box 3 shows the amount received in the current year;
• Box 4 shows the amount repaid by the taxpayer during the current year, if any;
• Box 5 shows the difference between Boxes 3 and 4 and must be reported as income on the current year return.

If Box 3 of the 1099-SSA includes any lump-sum payment for an earlier year, the taxpayer can use the lump sum election to refigure their taxable lump-sum payment for the previous year. If the amount reduces the taxable benefit for the current year, the amount can be deducted from their taxable income.

The SSA Lump-Sum Payment Worksheet will help you determine if the lump-sum election is beneficial for the taxpayer, but there is no need to complete the worksheet if the taxpayer has no taxable Social Security benefits.

Important: Before completing the Lump-Sum Payment Worksheet, be sure you have entered into the tax return all the income for the taxpayer (and spouse, if applicable).

To access the worksheet in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:

• Income
• Form 1099-R, RRB, SSA
• Social Security Benefits/RRB-1099
• Under Lump-Sum Payments select Begin Worksheet - Enter each of bit of information requested:
1. The earlier year the lump-sum payment was made for
2. The filing status in the earlier year
3. The total SSA payments received in the earlier year
4. The portion of this year's SSA that applies to the earlier year
5. The Modified AGI for the earlier year. Modified AGI equals AGI plus these adjustments:
• Adoption benefits (Form 8839)
• Qualified U.S. savings bond interest (Form 8815)
• Student loan interest
  2021 and fwd: Schedule 1 (Form 1040) line 21
  2019-2020: Schedule 1 (Form 1040) line 20
  2018: Schedule 1 (Form 1040) line 33
• Tuition and fees
  2018-2020: Schedule 1 (Form 1040) line 34
  2017 and prior: Form 1040 line 34 or Form 1040A line 19
• Domestic production activities
  2005-2017: Form 1040, page 1
• Foreign earned income or foreign housing (Form 2555 or Form 2555-EZ)
• Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico.
6. The taxable benefits reported in the earlier year

Select Continue after all the earlier year information has been entered. If you need to add a second lump-sum payment, you can do so. Otherwise, select Continue.

The program will calculate the current year amount of taxable benefits and adjust the amount automatically if it is beneficial to the taxpayer. The abbreviation LSE will print next to the recalculated taxable amount of SS benefits on Form 1040.

If the lump sum election doesn't benefit the taxpayer, then the worksheets won't be produced with the return.

Note: This is a guide to entering a lump sum Social Security payment into TaxSlayer ProWeb. This is not intended as tax advice.

Additional Information:

Publication 915, Social Security and Equivalent Railroad Retirement Benefits