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Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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do i have to pay tax on a lump sum settlement of 60,000 from

Customer Question

do i have to pay tax on a lump sum settlement of 60,000 from social security disability. Also I was told that I should only put this amount under my name. I have a checking account with my grandaughter and I was told if I this amount under both names I will be taxed. If under my name only I would not be taxed. Is this true?
Submitted: 8 years ago.
Category: Tax
Expert:  Marvin,EA replied 8 years ago.
Hello and thanks you for using Just Answer. It will depend on if any of the lump-sum settlement is taxable income. You must include the taxable part of your lump-sum payment of Social Security Disability benefits received on your 2008 tax return. The taxable amount will be reported to you on Form SSA-1099.

If you Social Security Disability benefits are taxable there are two ways to determine the amount of income to include:

1    You can use your current year's income to figure the taxable part of the total benefits received in the current year.

2     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. Use the lump-sum election worksheet at .

If you open a checking account with you and your granddaughter as the account holders you will not be tax on the funds you deposited in the account.   Since the total amount in the checking account is your any amount your granddaughter withdrawal from the account will be a gift to her. If you granddaughter withdrawal over $13,000 in a year you must file a federal gift tax return for the amount over $13,000.