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Per IRS Publication 915, a lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax.
In the case of a lump-sum benefit payment that is not a lump-sum death benefit, you would use the current tax year income to figure the taxable part of the total benefits received in that year. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits. Under the lump-sum election method, you refigure the taxable part of all of you benefits for the earlier year (including the lump-sum payment) 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).
You would not make any adjustments to an earlier year's return and would not file an amended return for the earlier year.
Worksheets will need to be completed to determine the taxable part of the lump-sum payment.
Publication 915 which includes further information as well as the worksheets and examples can be found at the following link:
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I was using the wrong PUB and could not find exactly what I was looking for.
Thank you very, very much.
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