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How do I account for taxable SS disability income that I had to repay to a third party (reimburse a private insurance company that paid non-taxable benefits)?

Forum|Forum|6 years ago
June 5, 2019
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I was temporarily disabled (Jul 15-Sep 16) from work, and had both sick leave paid to me (taxable) and third-party insurance paid to me (non-taxable). The insurance company required me to file for SS Disability to recoup part of their payments, which I did. In 2017 (long after I was working again), SS finally sent me a lump sum for the prior 14 month disability period. I then had to send part of that money to the insurance company to reimburse them for their payments. I now have a 2017 SSA-1099 listing the entire SS disability payment as taxable income (due to my other income that year), but only a letter from the insurance company listing the amount repaid to them, with no type of IRS form. I called them, and they said they don't issue any. How do I account for this in Turbotax, so I'm not paying tax on the entire SS award, including the portion I was required to reimburse to the insurance company? The IRS obviously has a copy of my SSA-1099, so I can't just randomly change the amount to reflect the full award less the portion I was required to send the insurance company, without any explanation. Any suggestions?

TurboTax Premier Windows

Best answer by DianeW777

This can be handled on your tax return for 2017. First we will handle the social security disability payments.

The Form SSA-1099 should show a total amount in box 5, and then the amount that is designated for each year in box 3.

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 prior year returns there will be an amount added to the tax this year.
If the tax is lower by including all of it on the 2017 return then that is where it will be taxed.

Your SSA-1099 lump-sum section breaks down the payments into what amount was received for each preceding year. You can only enter one year at a time; when finished, click Add Another Lump Sum if you need to enter benefits received for a different tax year.

Click the images I have attached to help you. You will need your prior returns for some of the information.

If your benefits were used to repay any type of prior benefits you received (workmen's compensation, disability payments) follow the steps below to enter your repayment as a deduction on your return.

If the sum of the box 5 amounts on all your SSA-1099 forms, and your spouse's SSA-1099 forms if filing jointly, is used to repay for benefits that you reported as taxable income in an earlier year, see "Repayment of benefits received in an earlier year" in IRS Publication 915 . The instructions to enter your deduction is shown below.

Click on Federal Taxes > Deductions & Credits [In TT Home & Biz: Personal > Deductions & Credits > I'll choose what I work on].
Scroll down to the Other Deductions and Credits section and click on the Start/Revisit box next to Other Deductible Expenses.
On the Less Common Expenses screen--

If the repayment was $3,000 or less:
Click the Yes box.
Enter the amount on the Enter More Expenses screen.

If the repayment was more than $3,000:

Click the No box.
On the Any Other Deductions screen, click the Yes box.
On Report Other Deductions, enter the amount in the box Claim of Right Repayment (Only If Over $3,000).
Click Continue.

Click the images attached to enlarge and view for assistance.

D

DianeW777Answer

This can be handled on your tax return for 2017. First we will handle the social security disability payments.

The Form SSA-1099 should show a total amount in box 5, and then the amount that is designated for each year in box 3.

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 prior year returns there will be an amount added to the tax this year.
If the tax is lower by including all of it on the 2017 return then that is where it will be taxed.

Your SSA-1099 lump-sum section breaks down the payments into what amount was received for each preceding year. You can only enter one year at a time; when finished, click Add Another Lump Sum if you need to enter benefits received for a different tax year.

Click the images I have attached to help you. You will need your prior returns for some of the information.

If your benefits were used to repay any type of prior benefits you received (workmen's compensation, disability payments) follow the steps below to enter your repayment as a deduction on your return.

If the sum of the box 5 amounts on all your SSA-1099 forms, and your spouse's SSA-1099 forms if filing jointly, is used to repay for benefits that you reported as taxable income in an earlier year, see "Repayment of benefits received in an earlier year" in IRS Publication 915 . The instructions to enter your deduction is shown below.

Click on Federal Taxes > Deductions & Credits [In TT Home & Biz: Personal > Deductions & Credits > I'll choose what I work on].
Scroll down to the Other Deductions and Credits section and click on the Start/Revisit box next to Other Deductible Expenses.
On the Less Common Expenses screen--

If the repayment was $3,000 or less:
Click the Yes box.
Enter the amount on the Enter More Expenses screen.

If the repayment was more than $3,000:

Click the No box.
On the Any Other Deductions screen, click the Yes box.
On Report Other Deductions, enter the amount in the box Claim of Right Repayment (Only If Over $3,000).
Click Continue.

Click the images attached to enlarge and view for assistance.

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S

sdmurphy1Author

Thank you, Diane W!

D

DianeW777

As of 2018, under the Tax Cuts and Jobs Act only amounts that are over $3,000 are eligible for a deduction or credit. The deduction screens and entry procedures are here for your convenience.

Taking the Income Reduction in TurboTax

Login to your TurboTax account or open your tax return.
Click on Federal Taxes and then Deductions & Credits.
Locate the section Other Deductions and Credits (you may first need to click on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop version.)
Click Start (or Revisit) beside Other Deductible Expenses.
A number of questions will appear on the upcoming screens. You are looking for the one that reads Claim of right repayment over $3,000. Click yes when you see this screen. (Be sure to ignore the similar question, repayments of $3,000 or less.)
Enter the amount of the repayment in the box Claim of right repayment over $3,000 and click Continue.
See the images below.