What is the Process of Entering Social Security Lump-Sum Election in ProWeb? 

Lump Sum Social Security payment refers to the payment made in the present year as back pay for the prior years. Depending on the present year AGI of the taxpayer, this income may be subject to tax and be reported on Form 1040. 

Box 3 to Box 5 of 1099-SSA of the taxpayer are relevant: 

• Box 3 displays the amount that was received in the present year 
• Box 4 displays that amount, if any, that was paid back by the taxpayer within the present year
• Box 5 displays the amount gotten as the difference between Box 3 and Box 4. This amount must be reported on the present year tax return as income. 

In the event that there is any lump sum payment for a previous year in Box 3 of the 1099-SSA, the taxpayer can use the lump sum election to recalculate their lump sum payment for the prior year that is subject to tax. In case the amount leads to a reduction of the taxable benefit for the present year, that amount can be deducted from their income that is subject to tax. 

To determine whether the lump sum election is of benefit to the taxpayer, make use of the SSA Lump-Sum Payment Worksheet.  Unless the taxpayer has some Social Security Benefits that are subject to tax, the worksheet will not need to be completed. 

To get access to the worksheet in the Taxx Savage program: 

• Go to the Federal Section of a tax return 
• Select Income 
• Then go to the IRA/Pension Distributions 
• Select Social Security Benefits 
• Select Begin Worksheet under the Lump Sum Payments 
• Enter every information as required: 
  • The previous year for which the lump sum payment was made 
  • That previous year’s filing status 
  • Total SSA Payments that was received in that previous year 
  • Part of this year’s SSA that applies to the previous year 
  • The previous year’s Modified AGI. This is equivalent to the previous year AGI together with the following previous year adjustments: 
    • Adoption benefits (Form 8839)
    • Qualified U.S. savings bond interest (Form 8815)
    • Student loan interest (Form 1040, page 1; or Form 1040A, page 1)
    • Tuition and fees (Form 1040, page 1; or Form 1040A, page 1)
    • Domestic production activities (for 2005 through 2017, Form 1040, page 1)
    • Foreign earned income or housing (Form 2555 or Form 2555-EZ)
    • Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico.
  • The taxable benefits that were reported in that previous year 

After entering all the previous year information, click on Continue. You can add another lump sum payment if you wish. If that is not the case, click Continue.  

The amount of taxable benefit for the present year will be calculated by the program which will also adjust the amount instantaneously to know if it is of benefit to the taxpayer. Next to the recalculated taxable amount of the SS benefits on Form 1040, the abbreviation LSE will be printed. 

Note: This is not tax advice. It is a guide on how to enter a lump sum Social Security payment into the Taxx Savage program. 

Additional Information:

Publication 915, Social Security and Equivalent Railroad Retirement Benefits