You have two
tax situations taking place. One
is the social security lump sum benefits and the other is the repayment of
previously taxed income.
Social
Security Lump Sum: There is a
"lump-sum" method of reporting in this situation which is all done on
the tax return for the year of receipt of the benefits. Enter the
appropriate amounts for each year when you start that section of your return.
The IRS has a special lump-sum
distribution calculation that
would allow you to be taxed as though the funds were actually received in the
year to which they are attributable or as though it were all for
2017. The
lowest tax result will be used.
Great news: TurboTax can walk you through that process and
calculate the proper tax based on your entries.
- If the tax is lower if it had been included on the
previous year returns (ex. 2013, 2014 & 2015) there will be an amount
added to the tax this year.
- If the tax
is lower by including all of it on the 2016 return then that is where it
will be taxed.
Check out the screenshots I
have attached to help you. You will need your previous year returns for some of the
information.
You can go directly to the area
to review your entry by following these steps.
1. Sign into your account and
select your current return.
2. Select Search (upper right)
3. Search for ssa1099 and Jump to ssa1099
5. Follow the interview to
enter or review your entry for these benefits.
Repayment of
Previously Taxed Income: Yes, you can include a repayment on your tax return.
Instructions here are
specifically for your repayment with the assumption it's greater than $3000 (if under $3000 TurboTax will walk you through the
screens more easily because the option is itemized deduction only).
- Repayment over $3,000: If the amount you repaid was more than $3,000,
you can deduct the
repayment on the same form you originally reported the income on
(Form 1040). However, you can
choose instead to take a tax credit for the year of repayment if you
included the income under a claim of right. This means that at the time
you included the income, it appeared that you had an unrestricted right to
it. If you qualify for this choice, figure your tax under both methods and
compare the results. Use the method
(deduction or credit) that results in less tax.
When
determining whether the amount you repaid was more or less than $3,000,
consider the total amount being repaid on the return. Each instance of
repayment is not considered separately.
-
Method 1. Figure
your tax for 2017 claiming a deduction for
the repaid amount. If you must deduct it as a miscellaneous itemized deduction,
enter it on Schedule A (Form 1040), line 28.
-
Method 2. Figure
your tax for 2017 claiming a credit for
the repaid amount. Follow these steps.
- Figure
your tax for 2017 without deducting the repaid amount.
- Refigure your tax from the
earlier year (the year you originally reported the income) without
including in income the amount you repaid in 2017.
- Subtract the tax in (2) from
the tax shown on your return for the earlier year. This is the credit.
- Subtract the answer in (3)
from the tax for 2016 figured without the deduction (step 1).
- If method 1
results in less tax,
deduct the amount repaid.
- If method 2
results in less tax,
claim the credit figured in (3) above on Form 1040, line 71.
If you choose a deduction, please enter it here (Method 1):
- Federal taxes - Deductions & credits -
Other deductions and credits - Other deductible expense
- Please answer YES to "Did you
have any other deductions that are not subject to the 2% limitation?"
- Please enter the amount you repaid under, "Claim of Right Repayment (Only if
over $3,000).
-
Click the images attached to enlarge and view for assistance.
If you choose a credit (This can only be done in the Forms mode of the
Desktop version of TurboTax), please enter it here (Method 2-only if greater
than $3000):
- FORMS -
F1040 - Below line 77 is the Other Payments and Credits Smart worksheet
- Please
enter the credit in line D. (click the image attached)
- This
credit should show up on F1040, line 72.
