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Old 05-04-2007, 02:13 AM   #1
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Taxes on Social Security backpay?

I was wondering if anyone knew if you had to pay taxes on the windfall from the back social security they owed you from the time you first applied. One reason is that the social security is from several years and not one. I would appriciate any help you can give.
Thanks!

 
Old 05-04-2007, 05:54 AM   #2
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Re: Taxes on Social Security backpay?

I hope this helps, this is from the IRS website: See publication 915

Frequently Asked Tax Questions And Answers
Keyword: Social Security Benefits/Income

6.1 Social Security Income: Back Payments

I received social security benefits this year that were back pay for prior years. Do I refile my returns for prior years? Are the back benefits paid in this year for past years taxable for this year?

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.

Generally, you use your current year's income to figure the taxable part of the total benefits received in the current year. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers the taxable portion of your benefits. Refer to Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for a detailed explanation of the election and worksheets.


References:

Tax Topic 423, Social Security and Equivalent Railroad Retirement Benefits
Publication 915, Social Security and Equivalent Railroad Retirement Benefits

 
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Old 05-04-2007, 06:57 PM   #3
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Re: Taxes on Social Security backpay?

Thank you so much for the info. That helps a lot.

 
Old 05-05-2007, 08:10 AM   #4
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Re: Taxes on Social Security backpay?

You are very welcome

I forgot to mention that if you used an attorney to secure your SSD benefits, you can deduct the legal expenses when you file your taxes.

 
Old 05-08-2007, 01:58 AM   #5
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Re: Taxes on Social Security backpay?

Quote:
Originally Posted by Soniarose59 View Post
I was wondering if anyone knew if you had to pay taxes on the windfall from the back social security they owed you from the time you first applied. One reason is that the social security is from several years and not one. I would appriciate any help you can give.
Thanks!
Hi Soniarose,

It took me 3 years to get approved for SSD. While they gave me a lump sum amount for those 3 years, at tax time that year, they sent me a form as to how that amount was broken down year by year. Apparently they realize it's unfair to count all that money in one year, because if they did, it would most likely result in my paying taxes on it. Because of this, I didn't have to pay any taxes, thankfully! BTW, in the IRS tax forms you receive at the end of the year, there is a "worksheet" that steps you through how to calculate if you owe taxes. Hope this helps.

Char

 
Old 05-14-2007, 05:15 PM   #6
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Re: Taxes on Social Security backpay?

Thanks so much for your help. It helps to hear from the experience of others.

 
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