Lump-Sum Election(p11)

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2009 in your 2009 income, even if the payment includes benefits for an earlier year.

Generally, you use your 2009 income to figure the taxable part of the total benefits received in 2009. 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 2009 (figured without the lump-sum payment for the earlier year).

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.

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.

If you received a lump-sum payment in 2009 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 2007. You must contact the RRB for a breakdown by year for any amount shown in box 9.

Jane Jackson is single. In 2008 she applied for social security disability benefits but was told she was ineligible. She appealed the decision and won. In 2009, she received a lump-sum payment of $6,000, of which $2,000 was for 2008 and $4,000 was for 2009. Jane also received $5,000 in social security benefits in 2009, so her total benefits in 2009 were $11,000. Jane's other income for 2008 and 2009 is as follows.

	Income	2008	2009
	Wages	$20,000	$ 3,500
	Interest income	2,000	2,500
	Dividend income	1,000	1,500
	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 2009 under the regular method. She completes Worksheet 2 to find the taxable part of the lump-sum payment for 2008 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 2009, 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 2009 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2009 (box 3 of Forms SSA-1099 and RRB-1099). None of your benefits are taxable for 2009. 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. 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 2009, enter $25,000  9.  25,000     Note. If you are married filing separately and you lived with your spouse at any time in 2009, 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. 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 2009, 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 8 10.  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 2009 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 13 14.  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 16 17.  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     If you received a lump-sum payment in 2009 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.

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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     2008    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 2008) (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 13 14.                             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 16 17.                             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-     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 2009.

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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 2009, minus the lump-sum payment for years before 2009  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 2009, 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 11 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. 5,000   14. Enter one-half of line 13 14. 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 16 17. 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:     Enter "LSE" to the left of Form 1040, line 20a, or Form 1040A, line 14a. If line 21 above is zero, follow the instructions in line 10 for "No" on Worksheet 1. Otherwise: Enter the amount from Worksheet 1, line 1 on Form 1040, line 20a, or on Form 1040A, line 14a. Enter the amount from line 21 above on Form 1040, line 20b, or on 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2009, enter "D" to the right of the word "benefits" on Form 1040, line 20a, or Form 1040A, line 14a.