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My brother in law received a lump sum from Social Security.

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My brother in law...

My brother in law received a lump sum from Social Security. He did not get to keep it, he had to repay his insurance from work for the disability he received before his social security began. He received a 1099 SSA. Does he have to file this since he did not get to keep it?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

Yes, because we listed his social security, he has to pay all the extra help he received from ObamaCare. It is saying he owes 6,433 in Federal Taxes and he only received 21,713.52 All year. He recieved 39,048 from Social Security that he gave to Standard Insurance Company. There's no way he should owe 6,433.

Submitted: 4 months ago.Category: Tax
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Customer reply replied 4 months ago
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Tax Professional: Stephen G., Sr Income Tax Expert replied 4 months ago
Stephen G.
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Tax Professional: Stephen G., Sr Income Tax Expert replied 4 months ago

Your brother-in-law may want to engage a CPA or EA to prepare his tax returns this year. The reason is that the rules on this situation can get complicated and the tax is somewhat difficult to compute.

Here's the way it works:

1. First of all the IRS allows an itemized deduction for the repayment to the Insurance Company in the year that the payment is made to them. Depending upon the size of the repayment, this can be enough to substantially reduce the income tax.

2. The second option is a special method available to compute the tax on the Social Security Lump Sum Payment. The SSA-1099 should breakout the total Social Security payment by applicable year. What needs to happen is that part of the Lump-Sum payment pertaining to prior years is taxed in a special way. Basically, you take the portion of the total Social Security payment pertaining to each of the prior years & obtain the tax returns for each of those prior years & re-compute the tax for each of those years as if the Social Security payment pertaining to each of those years was actually received in each of those years. The difference between the old & recomputed tax for each of those years becomes the current year tax on that portion of the Social Security payment. Depending upon the amounts (other income) involved in each of those years, the tax on that potion of the Social Security pertaining to those years often works out to zero or close to zero

So, as you can see it's somewhat complicated to put all this together and it makes sense to have a qualified Tax Preparer's signature on the return.

Let me know if you have any follow-up questions.

Please remember to rate my response as that is the only way the SITE will credit me for assisting you today.

Thanks very much,

Steve G.

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