Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Social Security Benefits; Form 1040, Line 20a

Lump-Sum Benefit Payments

Lump-Sum Benefit Payments

Some taxpayers may have received a lump-sum benefit payment. The payment could be for the current tax year and for prior tax years. Box 3 of the taxpayer's Form SSA-1099 or Form RRB-1099 will include the lump-sum payment. The form will also show the year, or years, of the payment. This additional information will be shown in Description of Amount in Box 3 on Form SSA-1099 or in boxes 7-9 on Form RRB-1099.

Tip

Do not confuse this type of lump-sum benefit payment with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax.

When figuring the taxable portion of social security benefits, two options are available for lump-sum benefit payments:

  • The first option allows the taxpayer to report the whole payment in the year it was received. When the taxpayer chooses this option, complete the Social Security Benefits Worksheet as usual by including the entire lump-sum payment on line 1.
  • The second option is to treat the payment as received in the earlier year or years. This is done by figuring whether any part of these benefits is taxable, based on the earlier year's income. Any part that is taxable is then added to any taxable benefits for the current year and included on Form 1040, line 20b. The taxpayer can elect this method if it lowers the taxable benefits.

Figuring the taxable benefits under the lump-sum election method is in scope for the VITA/TCE Programs. If the taxpayer chooses the second option, only the current year income will be adjusted. Do not file amended returns for the earlier years.