Taxpayer asks:
What a great service. Hope I can explain this good enough. I have been disabled for 3 years, have received disability income from a private insurance company. This was not taxable because I paid the premiums. Was approved for disability end of 2008 and got a lump sum check. Had to then send the total proceeds to Hartford Ins. since they had paid me more than SS will. Now, do I have to pay tax on the money received from SS?
Taxgirl says:
Good news! You may get a break on this one.
Hopefully, your Form SSA-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Your net benefits should be reported to you as be a negative number at box 5.
If you itemize, you’re entitled to a deduction for the difference (box 5). If that amount is $3,000 or less, it’s considered a miscellaneous deduction subject to the 2% AGI limit. You’ll take that deduction at Schedule A, line 28.
If the amount is more than $3,000, you may be able to claim a tax credit instead. The hoops you have to jump through are a little ridiculous (did I say/write that out loud?) – you can find the formula in IRS Publication 915. There are a lot of calculations involved; it requires you to recalculate tax from prior years to figure the credit. It’s a tricky calculation so I highly recommend getting some assistance from a tax pro – you don’t want to pay more than you need to!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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{ 2 comments… read them below or add one }
I’ve been getting Social Security since I was 62 and am now 66 and 8 months. I have received about $78,000. I read an article that said I could repay all of my payments, reapply and get a payment based on my current age (about $2,100/mo). I currently get $1,554/month. If I repay, can I claim the payment as a deduction to recoup federal taxes I’ve paid and what will my new monthly payment be?
Honestly, I’ve never heard of this – but it sounds like a Social Security matter. I’d recommend contacting them (www.ssa.gov) or a Social Security lawyer.