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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14837
Experience:  15years with H & R Block. Divisional leader, Instructor
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I received a disability this year that contained amounts

Customer Question

I received a disability this year that contained amounts being paid out for the last three previous years. I am not sure how to report this income without it affecting my healthcare marketplace subsidy. It is going to appear as though all the income was for this year.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello

The payment you received is taxable for the 2015 tax year. Even though it was a lumpsum payment for past years it is still taxable in the year received.

You must include the taxable part of a lump-sum payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.

There are two ways to determine the amount of income to include if this was SS disability:

  • 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).
Expert:  Robin D. replied 1 year ago.

Please respond after you read the above