OLT TAX CORNER ~ Social Security Income

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in the current year in your current year's income, even if the payment includes benefits for an earlier year.

Generally, you use your current year's income to figure the taxable part of the total benefits received in the current year. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers the taxable portion of your benefits. Refer to IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for a detailed explanation of the election and worksheets.

To determine whether any of your benefits are taxable, compare the base amount for your filing status with the total of one half of your social security payments plus all your income from other sources, including tax exempt interest. If you are married and file a joint return, you must combine your incomes, your social security and equivalent tier 1 railroad retirement benefits when figuring the taxable portion of the benefits.

The taxable amount of the benefits is figured on a worksheet in the Form 1040 instruction book, or in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Refer to IRS Tax Topic 423, Social Security and Equivalent Railroad Retirement Benefits, for base amounts, and additional information regarding taxability and reporting requirements.

No, this type of income is nontaxable and does not need to be shown on your return.

The information from your SSA-1099 is entered on lines 6a and 6b of form 1040. There is a worksheet to determine the amount of taxable benefits. The taxable amount of the benefits is figured on a worksheet in the Form 1040 instruction book, or in Publication 915, Social Security and Equivalent Railroad Retirement Benefits.