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previous page Previous Page: Publication 915 - Social Security and Equivalent Railroad Retirement Benefits - How Much Is Taxable?
next page Next Page: Publication 915 - Social Security and Equivalent Railroad Retirement Benefits - Deductions Related to Your Benefits
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p915-003.htm#en_us_publink100097893

Lump-Sum Election(p11)


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previous topic occurrence Lump-Sum Election next topic occurrence

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2008 in your 2008 income, even if the payment includes benefits for an earlier year.
Deposit
This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax.
Generally, you use your 2008 income to figure the taxable part of the total benefits received in 2008. 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 your taxable benefits.
Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year's income. Then you subtract any taxable benefits for that year that you previously reported. The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for 2008 (figured without the lump-sum payment for the earlier year).
EIC
Because the earlier year's taxable benefits are included in your 2008 income, no adjustment is made to the earlier year's return. Do not file an amended return for the earlier year.
taxmap/pubs/p915-003.htm#en_us_publink100097896

Will the lump-sum election method lower your taxable benefits?(p11)


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To find out, take the following steps.
  1. Complete Worksheet 1 in this publication.
  2. Complete Worksheet 2 and Worksheet 3 as appropriate. Use Worksheet 2 if your lump-sum payment was for a year after 1993. Use Worksheet 3 if it was for 1993 or an earlier year. Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received the lump-sum payment.
  3. Complete Worksheet 4.
  4. Compare the taxable benefits on line 19 of Worksheet 1 with the taxable benefits on line 21 of Worksheet 4.
If the taxable benefits on Worksheet 4 are lower than the taxable benefits on Worksheet 1, you can elect to report the lower amount on your return.
taxmap/pubs/p915-003.htm#en_us_publink100097897

Making the election.(p11)


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If you elect to report your taxable benefits under the lump-sum election method, follow the instructions at the bottom of Worksheet 4. Do not attach the completed worksheets to your return. Keep them with your records.
EIC
Once you elect this method of figuring the taxable part of a lump-sum payment, you can revoke your election only with the consent of the IRS.
taxmap/pubs/p915-003.htm#en_us_publink100097899

Lump-sum payment reported on Form SSA-1099 or RRB-1099.(p11)


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If you received a lump-sum payment in 2008 that includes benefits for one or more earlier years after 1983, it will be included in box 3 of either Form SSA-1099 or Form RRB-1099. That part of any lump-sum payment for years before 1984 is not taxed and will not be shown on the form. The form will also show the year (or years) the payment is for. However, Form RRB-1099 will not show a breakdown by year (or years) of any lump-sum payment for years before 2006. You must contact the RRB for a breakdown by year for any amount shown in box 9.
taxmap/pubs/p915-003.htm#en_us_publink100097900

Example(p11)


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Jane Jackson is single. In 2007 she applied for social security disability benefits but was told she was ineligible. She appealed the decision and won. In 2008, she received a lump-sum payment of $6,000, of which $2,000 was for 2007 and $4,000 was for 2008. Jane also received $5,000 in social security benefits in 2008, so her total benefits in 2008 were $11,000. Jane's other income for 2007 and 2008 is as follows.
 Income20072008 
 Wages$20,000$ 3,500 
 Interest income2,0002,500 
 Dividend income1,0001,500 
 Fully taxable pension            18,000 
 Total $23,000$25,500 
To see if the lump-sum election method results in lower taxable benefits, she completes Worksheets 1, 2, and 4 from this publication. She does not need to complete Worksheet 3 because her lump-sum payment was for years after 1993.
Jane completes Worksheet 1 to find the amount of her taxable benefits for 2008 under the regular method. She completes Worksheet 2 to find the taxable part of the lump-sum payment for 2007 under the lump-sum election method. She completes Worksheet 4 to decide if the lump-sum election method will lower her taxable benefits.
After completing the worksheets, Jane compares the amounts from Worksheet 4, line 21, and Worksheet 1, line 19. Because the amount on Worksheet 4 is smaller, she chooses to use the lump-sum election method. To do this, she prints "LSE" to the left of Form 1040, line 20a. She then enters $11,000 on Form 1040, line 20a, and her taxable benefits of $2,500 on line 20b.
Jane's filled-in worksheets (1, 2, and 4) follow. taxmap/pubs/p915-003.htm#w15320p05
Example. Jane Jackson
Filled-in Worksheet 1.  Figuring Your Taxable Benefits                 
Before you begin:
  • If you are married filing separately and you lived apart from your spouse for all of 2008, enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.
  • Do not use this worksheet if you repaid benefits in 2008 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2008 (box 3 of Forms SSA-1099 and RRB-1099). None of your benefits are taxable for 2008. For more information, see Repayments More Than Gross Benefits.
      
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a  1.$11,000    
 2.Enter one-half of line 1 2. 5,500 
 3.Enter the total of the amounts from:
Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21
Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13
 3. 25,500 
 4.Enter the amount, if any, from Form 1040 or 1040A, line 8b 4.             
 5.Form 1040 filers: Enter the total of any exclusions/adjustments for:
  • Qualified U.S. savings bond interest (Form 8815, line 14)
  • Adoption benefits (Form 8839, line 30)
  • Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and
  • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico
Form 1040A filers: Enter the total of any exclusions for:
  • Qualified U.S. savings bond interest (Form 8815, line 14)
  • Adoption benefits (Form 8839, line 30)
 5.-0- 
 6.Add lines 2, 3, 4, and 5 6. 31,000 
 7.Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in amounts you entered on the dotted line next to line 36. Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17  7.-0- 
 8.Is the amount on line 7 less than the amount on line 6?    
  No. stop, non of your benefits are taxable None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.    
  Yes.  Subtract line 7 from line 6 8. 31,000 
 9.If you are:
  • Married filing jointly, enter $32,000
  • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2008, enter $25,000
 9. 25,000 
 Note. If you are married filing separately and you lived with your spouse at any time in 2008, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.     
10.Is the amount on line 9 less than the amount on line 8?    
  No. stop, non of your benefits are taxable None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2008, be sure you entered "D" to the right of the word "benefits" on Form 1040, line 20a, or on Form 1040A, line 14a.     
  Yes.  Subtract line 9 from line 810. 6,000 
11.Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2008 11. 9,000 
12.Subtract line 11 from line 10. If zero or less, enter -0-.12.-0- 
13.Enter the smaller of line 10 or line 11 13. 6,000 
14.Enter one-half of line 1314. 3,000 
15.Enter the smaller of line 2 or line 14 15. 3,000 
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16.-0- 
17.Add lines 15 and 1617. 3,000 
18.Multiply line 1 by 85% (.85)18. 9,350 
19.Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19.$3,000 
  tip If you received a lump-sum payment in 2008 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit.    
taxmap/pubs/p915-003.htm#w15320p06
Pencil tip

Example. Jane Jackson
Filled-in Worksheet 2.Figure Your Additional Taxable Benefits
(From a Lump-Sum Payment for a Year After 1993)
Enter earlier year     2007
 
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year  1.$2,000    
 Note. If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Otherwise, go on to line 2.       
 2.Enter one-half of line 1 2.1,000 
 3.Enter your adjusted gross income for the earlier year 3.23,000 
 4.Enter the total of any exclusions/adjustments you claimed in the earlier year for:
  • 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 2007) (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
 4.-0- 
 5.Enter any tax-exempt interest received in the earlier year 5.-0- 
 6.Add lines 2 through 5 6.24,000 
 7.Enter your taxable benefits for the earlier year 7.-0- 
 8.Subtract line 7 from line 6 8.24,000 
 9.If, for the earlier year, you were: 
 
  • Married filing jointly, enter $32,000
  • Single, head of household, qualifying widow(er), married filing separately and lived apart from your spouse for all of the earlier year, enter $25,000
 9.25,000 
 Note. If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.     
10.Is the amount on line 8 more than the amount on line 9?  
   No.  Skip lines 10 through 20 and enter -0- on line 21.   
   Yes. Subtract line 9 from line 8 10.                         
11.Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, or married filing separately and you lived apart from your spouse for all of the earlier year 11.                         
12.Subtract line 11 from line 10. If zero or less, enter -0-.12.                         
13.Enter the smaller of line 10 or line 11 13.                         
14.Enter one-half of line 1314.                         
15.Enter the smaller of line 2 or line 14 15.                         
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16.                         
17.Add lines 15 and 1617.                         
18.Multiply line 1 by 85% (.85)18.                         
19.Refigured taxable benefits. Enter the smaller of line 17 or line 18 19.                         
20.Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year)20.                         
21.Additional taxable benefits. Subtract line 20 from line 19. Also enter this amount on Worksheet 4, line 20 21.-0- 
  caution Do not file an amended return for this earlier year. Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2008. 
taxmap/pubs/p915-003.htm#w15320p07
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Example. Jane Jackson
Filled-in Worksheet 4.Figure Your Taxable Benefits Under the Lump-Sum Election Method
(Use With Worksheet 2 or 3)
     
Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet.
 1.Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for 2008, minus the lump-sum payment for years before 2008  1.$9,000   
 Note. If line 1 is zero or less, skip lines 2 through 18, enter zero on line 19, and go to line 20. Otherwise, go on to line 2.      
 2.Enter one-half of line 1 2.4,500 
 3.Enter the amount from Worksheet 1, line 3 3.25,500 
 4.Enter the amount from Worksheet 1, line 4 4.-0- 
 5.Enter the amount from Worksheet 1, line 5 5.             
 6.Add lines 2, 3, 4, and 5 6.30,000 
 7.Enter the amount from Worksheet 1, line 7 7.-0- 
 8.Subtract line 7 from line 6 8.30,000 
 9.Enter the amount from Worksheet 1, line 9. But if you are married filing separately and lived with your spouse at any time during 2008, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18  9.25,000 
10.Is the amount on line 8 more than the amount on line 9?
  No.  Skip lines 10 through 18, enter -0- on line 19, and go to line 20.
  Yes. Subtract line 9 from line 8
10.5,000 
11.Enter the amount from Worksheet 1, line 1111.9,000 
12.Subtract line 11 from line 10. If zero or less, enter -0-12.-0- 
13.Enter the smaller of line 10 or line 11 13.5,000 
14.Enter one-half of line 1314.2,500 
15.Enter the smaller of line 2 or line 14 15.2,500 
16.Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-16.-0- 
17.Add lines 15 and 1617.2,500 
18.Multiply line 1 by 85% (.85)18.7,650 
19.Enter the smaller of line 17 or line 18 19.2,500 
20.Enter the total of the amounts from Worksheet 2, line 21 and Worksheet 3, line 14, for all earlier years for which the lump-sum payment was received 20.-0- 
21.Taxable benefits under lump-sum election method. Add lines 19 and 20 21.$2,500 
Next. Is line 21 above smaller than Worksheet 1, line 19?
  No. Do not use this method to figure your taxable benefits. Follow the instructions on Worksheet 1 to report your benefits.
  Yes. You can elect to report your taxable benefits under this method. To elect this method:
  
  1. Enter "LSE" to the left of Form 1040, line 20a, or Form 1040A, line 14a.
  2. If line 21 above is zero, follow the instructions in line 10 for "No" on Worksheet 1. Otherwise:
    1. Enter the amount from Worksheet 1, line 1 on Form 1040, line 20a, or on Form 1040A, line 14a.
    2. Enter the amount from line 21 above on Form 1040, line 20b, or on 1040A, line 14b.
    3. If you are married filing separately and you lived apart from your spouse for all of 2008, enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.
 
previous pagePrevious Page: Publication 915 - Social Security and Equivalent Railroad Retirement Benefits - How Much Is Taxable?
next pageNext Page: Publication 915 - Social Security and Equivalent Railroad Retirement Benefits - Deductions Related to Your Benefits
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication