Social Security Questions? Ask a Social Security Expert
Thanks for your Social Security tax question.
You will need to report all of the income received from Social Security on your 2013 tax return. However, there are two calculations that determine how much tax is due. You use the calculation that results in the LOWEST tax of the two calculations.
The first calculation is to add all the income in 2013.
The second calculation is rather complex, but essentially you calculate the tax due had you received the portion of the lump sum payment in the year it was assigned. In other words, you would calculate the tax due for 2011 for the portion of the payment that was for 2011 tax year. You would still have to pay the tax by April 15 2014.
I hope this helps you understand the basic taxability of the lump sum payment.
I would be filing either married filing separately or as head of household. My entire income at present is social security disability. Obviously, at that income level my tax bracket will be considerably lower than in prior years when I filed married filing jointly with a husband who made over $100,000. Are you saying that my social security disability income will be taxed at the higher bracket for 2011 and 2012?
You CHOOSE which calculation results in a lower tax.
If you file MFS in 2013, 85% of your benefit is taxable income.
If you file as HOH in 2013, it is likely that none of the benefit is taxable.