Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
SSA benefit started 2016, Withdraw 2017 & impacts to 2016 & 2017 Returns?
Posted by: b1_lee, April 2, 2017 01:08AM
My wife started SSA benefit in last part of 2016 & received a 2016 SSA-1099 for 2 months benefit.

She went to SSA office & file a withdraw benefit at end of March 2017. It will take some time before SSA send her a bill to pay back all her benefit.

Question #1 - Is it better we go ahead & file 2016 return with 2 months benefit instead file for return extension?

Where in Federal return she report the benefit?

Where she calculate how much of that benefit is taxable?

Does Illinois tax the benefit?

If not, where she make the adjustment in her Illinois return?

Question #2 - Assume she does not file extension. After SSA send her a bill to pay back & she send in payment (part will be for 2016 & 2017), what 2017 form for the total benefit will they send?

Where she file for 2017 return to get back all the credit?

Re: SSA benefit started 2016, Withdraw 2017 & impacts to 2016 & 2017 Returns?
Posted by: Alan S., April 3, 2017 08:05PM
You should file 2016 since it will not be affected by this and cannot be amended due to returned benefits. There is a worksheet to figure the taxable portion but it is much easier to use a tax program that will calculate the taxable portion. The max taxable portion will be 85% of the 2016 benefit, but could be much less or even 0 if your joint income is modest.

For 2017 however, you may have two choices for reducing your 2017 tax that includes the returned benefits from 2016 and a worksheet. See p 15 of this Publication: []

Taxable SS benefits go on the first SS benefit line on Form 1040. There is no form to be added.

Re: SSA benefit started 2016, Withdraw 2017 & impacts to 2016 & 2017 Returns?
Posted by: b1_lee, April 6, 2017 07:27PM
My wife tax year 2016 SSA-1099 is $2000 & her 2017 will probably be $4000. Will her tax year 2017 SSA-1099 box 5 = ($6000)?

Itemized deduction did not work last 10 year and will not work in future, so my hope is 2nd way.

Please check below:-

Tax year 2016
1. Skip it because I took standard deduction

2a Skip it because I took standard deduction

2b $2000 is repayment. Must I lower Form 1040 line 37 by $2000 & continue all the way or just do $2000*0.28=$560 (28% is my marginal tax rate) because I did "Qualified Dividends & Capital Gain Tax Worksheet - Line 44" (a long work)

2c Won't $560 likely be the answer if I did 2b the long way?

2d Won't $560 be the answer?

Tax year 2017 Replace 2016 with 2017 & $2000 with $4000 & same marginal tax rate-28%

Same action steps 1. & 2a-2d

2d Won't $1320 be the answer?

$560+$1320=$1880, so I claim a credit for the amount from step 2(c) above on Form 1040, line 73. Check box d and enter I.R.C. 1341 in the space next to that box

If $1880 is slightly off from the long way of 1, 2a-2d, won't IRS computer catch this honest/math error & correct it anyway?

Do you see any problems with this approach?

If my wife start SSA benefit 2nd half of 2017, her total 2017 SSA-1099 will most likely = or > $6000 which will lead box 5 to be zero or a positive number.

If not, I might be force to start my SSA benefit much sooner in order to achieve a positive number.
In this case, we will avoid all above re-figuring?

If box 5 > $0, we just include it in 2017 Form 1040 Line 20a?

Is this option worth to avoid all the re-figuring?

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