Back Payments
Question: I received social security benefits this year that were back benefits for prior years. Do I amend my returns for prior years? Are the back benefits paid in this year for past years taxable for this year?
Answer:
You cannot amend returns for prior years to reflect social security benefits received in a single lump-sum in a single year. You must include the taxable part of a lump-sum payment of benefits received in the current year (reported to you on Form SSA-1099) in your current year's income, even if the payment includes benefits for an earlier year.
However, there are two ways to determine the amount of income to include:
- You can use your current year's income to figure the taxable part of the total benefits received in the current year. OR
- You may make an election to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year.
You can select the lump-sum election method if it lowers the taxable portion of your benefits.
- Under this method you refigure the taxable part of all your benefits (including the lump-sum payment) for the earlier year using that year’s income.
- Then you subtract any taxable benefits for that year that you previously reported.
- The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for the current year (figured without the lump-sum payment for the earlier year).
- There are worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to help you calculate the taxable portion using this method.
Additional Information:
Category: Social Security Income
Subcategory: Back Payments
