SSDI Lump Sum Payback to LTD provider not taxable?

[lbsrt4]

I wanted to verify some information my wife's Long Term Disability provider told me.....

My wife has rec'd a lump sum SSDI payment. Per the LTD rules, she will have to give back most, if not all, of the lump sum to the LTD provider (LTD benefit is greater than the SSDI benefit). Her monthly LTD benefit will be reduced by the SSDI amount from this point on.

I thought we would get stuck with the tax bill for the lump sum & wouldn't have the money to pay for it because it all went back to the LTD provider. The LTD provider informed me that whatever money we pay back to them would be put on a form similar to a W-2. Since we didn't keep the SSDI money, it's not taxable income. Whatever money we keep, is taxable. It's analogous to a 401K rollover....if you rollover, no problem, if not you get hit with taxes.

It sounds to good to be true since it would be FAIR....but I'm curious if anyone has ever heard of this or had any experience with SSDI payback to a LTD provider? Is there a form that you submit for that tax year & how do you file it properly? Does anyone know what this form is called?

Thanks,

Larry

[JAinNC]

What I understand you saying is ... that SSA (SSDI) paid your wife for current and prior years. Some of those years she was getting LTD that must e paid back. If it is paid back in this current year, it will reduce the amount on the 1099 SSA to be reported as the lump sum for 2007 that will be rec'd in Feb 2008. (If this is the year you are dealing with)

The amounts of SSDI on the 1099 SSA reporting form will be noted at the lower portion of that form to show the amount of SSDI for each individual year the lump sum covers.

Consult an experience professional for your tax preparation. The SS benefit maybe treated as rec'd all in the current year, or calculations on a lump sum worksheet may apply the benefit to the prior years (with no amendment needed) to get you the best (lowest) tax results. Make sure you have copies of your prior years returns.

If you discuss this with a preparer and they are not familiar with "Treatment of lump sum SSA benefit" to determine the best effect. .... Call another one.

Jeannie