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Back pay received for 2007, 2008, 2009 should I do a lump sum for 2009
Received Social Security Back Pay in lump sum for 2007, 2008 and 2009. Should I amend 2007 & 2008 or should I include all on my 2009 return deducting the fee I paid out for lawyer. My wife was on unemployment all year 2009, I have 2 small pensions.
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No, you would not go back and amend those years. You follow a special procedure when this occurs called, "Lump sum election". This procedure is fully explained in Pub 915, on IRS webpage. There are special charts in the publication that take into consideration the tax rates for the previous years, and use those rates to calcualte the tax on that years benefits. The charts will then total all the years taxable amount, and if those rules are more beneficial, they will instruct you to enter LSE on your 2009 return, when you report that amount. You would not amend prior years. |
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