2004 disability Soc. Sec.

[Bird Legs]

Am working on a 2004 tax return for client. Client received SSA 1099 showing the following amounts:
Box 5 Net Benefits $30,042. less M/C prem. $133. Less Attorneys fees $5,300.
It also reflects the following: $14,280. pd. in 2004 for 2003. $1,166. pd in 2004 for 2002.
The amounts paid for 2003 and 2002 are included in the Box 5 total net benefits.
Question: How are the amounts paid for 2003 & 2002 taxed? All on the 2004 return?
Or is an amended return required to be filed for the 2 previous years reporting the amounts paid?
2nd question: What about the attorneys fees. Are these deductable? This fee was paid directly to the attorney by SSA.
Any help will be appreciated.
.

[ED SMITH]

SS Benes

The IRS calls this "lump sum election". It is covered in Pub 915. An amended return is not done, but involves calculating the tax effect for the previous years. I did one of these last year and when I am able to dig it out I'll pass along the info.

What were the attorney's fee for? This will determine whether or not they are deductable.

ED

[Birdlegs]

Attorneys Fees

The attorneys fees were for obtaining the Soc. Sec. Disability benefits. These were
the legal fees paid directly by Soc. Sec. Admin. to the attorney. This took approx. 8 months to complete.
Another question: Are the Medicare Ins. Premiums deducted on page 1, form 1040, as an adjustment to income if the taxpayer is self employed, over 65?
Thanks for your response.

[S T]

SSA and Attorney Fees

Pub 915 contains the worksheets to calculate the lump sum election and some examples.

Attorney fees are deductible if incurred for the disabiity appeal.

Attorney Fee Deduction. If a taxpayer discovers that some of the Social Security lump sum - when added to regular benefits received in the same year - turns out to be taxable, the attorney fee may be deducted from income, but only to the same extent that Social Security is taxed. For example, if a taxpayer paid tax on 50% of SSA benefits received, the taxpayer may deduct half of the attorney fee paid or incurred during the same year. [IRS Revenue Ruling 87-102] The taxpayer faces the burden of filing an itemized return, of course, and this limited deduction is further subject to the “2% of adjusted gross” ceiling on miscellaneous itemized deductions.

http://www.ss-law.com/articles/SSandIncomeTax.html

Sandy

[Birdlegs]

Sandy

really appreciate your time in responding to my question.
Have another one. Can Medicare premiums, deducted from the Soc. Sec. payments
be deducted as an adjustment to income on the 1040 instead of Sched. A when the
client is self-employed and files sched. C?

[S T]

Medicare B premiums

Birdlegs, See the discussion on page 4 of this Board "SE Health Insurance" last posting 9/18/05. Or go to Search this forum and type in "SE Health Insurance"

The IRS advises "NO", but there is a great discussion about this issue.

Sandy

[ED SMITH]

medicare premiums

Yes, medicare premiums can be deducted on Sch A just like any other medical/dental expense.
ED

[Bird Legs]

SSA & Pub 915-Sandy

Printed out Pub 915 & got the worksheets for calculating the lump sum election.
However, just as I finished the calculations a light went on.
Went to CFS Tax Tools and sure enough there is a calculator titled "SS/RRB Taxability & Lump Sum Worksheet". You just plug in 2 or 3 figures and it does everything else.
In comparing it with the manually prepared worksheet discovered I had made an error.
Really appreciate your assistance and everyone else on this board.

[S T]

Cfs

Thought about suggesting CFS, but couldn't remember whether or not you were one of the people that had it. I have made a mental note to suggest in the future.

Great time saver!!!

So what did you decide on the medicare premiums Part B, for the 1040 page 1 deduction?

"Supplemental" plans purchased through Blue Cross,Blue Shield, etc should be allowed no problem. But the question is whether or not the Part B deducted from the Social Security Benefit is allowed as a SE Health Care.

Sandy

[Bird Legs]

Sandy-Medicare Premiums

This tax return is completed, all except for the M/C Prem. part B. Am still thinking this
over. May just flip a coin. Heads, take it. Tails forget it. Will have to make up my mind
today.
Certainly appreciate your help in this. Still have about 4 more returns to finish.
Probably will not get 2 of them completed. Am having to do write up work on them
to get the info needed.
Will be working all weekend. This doesn't set too well with the wife.

[ED SMITH]

Adj to Income

Seems like this came up several times on the QF board. The conclusion each time was that because it was a subsidized program it could only be deducted on Sch A.
ED

[Bird Legs]

Ed-Medicare prem.

Yes, this has come up several times. Several of the responders said yes, as an adjustment on page 1, 1040. Others say no, Sched. A deduction only.
I have vacillated in the past and have used it both ways. Indecisive, you might say.
Or, as Black Bart would put it, trying to cover both ends.