Lump Sum Social Security Benefits Payments

Taxation of lump sum social security benefits

In any year you may receive a lump sum payment (a retroactive payment of your social security benefits), even if this payment includes social security benefits for an earlier year, the taxable part must be included in your income in the year you receive the lump sum payment.

Is the lump sum death benefit from the SSA taxable?

Do not confuse the lump sum benefit payment with the lump sum death benefit that the SSA pays to many of its beneficiaries. No part of the death benefit is included in taxable income.

What is a lump sum election?

Generally, you use your current year income to determine the total taxable benefits received that year. However, you may be able to figure the taxable part of a lump sum payment for an earlier year separately using your income from the earlier year. You can choose this method if it lowers the amount of your taxable benefits. This is called a lump sum election.

If you receive social security benefits for one or more earlier years, follow the instructions in the IRS publication 915 to see whether making the election will lower the amount of your taxable social security benefits.

If so, include the lower taxable amount on line 20b of tax form 1040 and write "LSE" to the left of line 20a.

Either way, you report the taxable part of your total benefits on your current year Form 1040. You do not file an amended return for the earlier year.