Social Security Questions? Ask a Social Security Expert
Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.
You cannot amend returns for prior years to reflect social security benefits received in a single lump-sum in the current 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,Social Security Benefit Statement) 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 select the lump-sum election method if it lowers the taxable portion of your benefits:
Worksheets in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, can help your CPA calculate the taxable portion using this method but I am sure they know that already.
Your positive rating is always thanks enough.
Please let me know if you need clarification. If you do not then a positive 5 star rating is appreciated so I get credit for the response. (look for the STARS or SMILEY FACES)
The amount for each year is what is used. That information is listed on your payout information. They break down how much was for each year.
Then half of that benefit plus all your other income is looked at to see if any of the SSDI is then taxable.
If you want to make sure your CPA calculated in the best way for you then ask them if they actually calculated the lump sum for the year of payment AND split it all to the year it was meant for.
You specifically asked
can it be proportionally applied to the applicable prior years to reduce the total due? And if so, would that require those year's TR's to be amended?
I have told you it can be calculated based on prior year info but you do not do an amended return when you calculate that way.
To figure out the taxable part use this formula
Compare the base amount for your filing status with the total of:
The base amount for your filing status is:
You have to do that for each year.