Social security Payment

[Christian]

​A client has come in whose wife (age 62) has received a large social security disability payment for some $20,000 plus. Apparently the disability award took some time and this is a payment for back time. I've not encountered this before and even though the payment is for social security disability my thought is to add it into gross income on line 20a. However, in reading this board over time I recall someone advising this income can somehow be prorated and would appreciate any info on this subject.

[jklcpa]

Your client will pay tax on it on the 2013 return, but you can calculate the portion that would have been taxable in that earlier year, and if that is less and results in less tax, then you elect to do that. ATX had a nice worksheet that was accessed from the social security input screen that allowed the preparer to enter the relevant data from the earlier years' tax returns. Open the worksheet for line 20, and if it is similar to earlier years, you'll see down toward the bottom a place to jump to the SS Lump Sum Worksheet.

IRS pub 915 has a good explanation with an example. Look at the section "Lump Sum Election" : http://www.irs.gov/publications/p915/ar02.html#en_US_2013_publink100097893

[kcjenkins]

Judy has it just right. Used to be a real pain when we had to do the SS Lump Sum Worksheet by hand, but the program makes it easy now.