Lump Sum for Social Security

[dmj4]

Client had Social Security benefits paid in 07 for 04, 05, 06, and 07. Can I elect the lump sum method for 06 but report 04, 05 and 07 on 07 or do I have to carry all years back, if I carry 06 back?

Thanks!

[Snaggletooth]

Can't pick and choose

I had one like this a few years ago, and I was given the option to claim it all in the year of receipt, or spread over all years. I couldn't take the years piecemeal as I saw fit.

It's been a few years, though. But I don't think that has changed.

[dmj4]

That's what I figured

Thanks, I thought that would be too good to work. He had $247K, $170K and $12K respectively.

Thanks Neighbor!

dmj4

[erchess]

I can confirm that the law has not changed

since Snags had his case. I don't know what it is about you guys not running into these, however. I do at least one every year. I have noticed that if income has been about the same from year to year over the years in question, Lump Sum makes little difference and if income has declined over the relevant period Lump Sum yields more tax. It is only when income has climbed significantly over the period that I have actually saved my clients money with the lump sum election.

[dmj4]

I have them, too.

I have had quite a few of them over the years, I had two last year. I have not had one with such a huge difference in income for the years in which benefits were paid. It has helped my clients quite a few times, especially if single (so there is no large W-2 on the return) and a few K in income each year but not enough to create the tax that $87K of social security creates in one year.

In this case he had low income in 2007 & 2006 but high income in 04 and 05.

Thanks,
dmj