Repaid disability

[spencer]

Client received disability for several years. Soc Sec eventually paid for all back years. $60,000 disability required to be paid back. $80,000 Back Soc Sec received. Attorney charged $8,000 to fight the SSA. OK How do I report all of this. Such fun. Any help would be greatly appreciated..............Ed

OK, another source says repaid disability is a deduction on Sch A not subject to 2%. Attorney fee is a deduction on Sch A but only 85% of it because 85% of the SS is taxable. Soc Sec benefits are income. Sounds simple enough. Yea

[okie1tax]

Disability Repaid

You very definitely want to do amendeds for the prior years to see what the difference in TAXES is, both federal and state. If the total difference in taxes exceeds the amount of additional taxes on this years return because of the SSA, then you want to do a Form 1341 Claim of Right. You also want to see how much, if any of the Social Security for that year would have been taxable. Depending on income in each year, maybe very little of the SSA would have been taxable. If so, you need to do the worksheets in Pub ???? (I'll have to find it, it is for Social Security) so that only the correct amount of SSA is taxed this year. Fun and games when you have to do both.

[checkingthebasics]

repaid ss

The social security received in current year for prior years that becomes taxable income
should be carried back to prior years per the worksheets.

[okie1tax]

Repaid Disability

The Pub is 915 and you use the worksheets to determine how much of the lump-sum is included as taxable income on THIS years tax return. I have had some that really did not make much, if any, difference, income high all years so most of it taxable. I have also had some where very low income and maybe none of one or more prior years would be taxable. You do NOT do amended returns and file them. One thing to be very careful with is your state return. Some state have a version of Form 1341, some states do not tax SSA, etc.

[taxea]

I would do both to see whether the amended would benefit the client more than taking it all in one year.

[spencer]

Wow

Thank you all very much. I'll work on this.