11.   Social Security and Equivalent Railroad Retirement Benefits

Introduction

This chapter explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. It explains the following topics.

  • How to figure whether your benefits are taxable.

  • How to use the social security benefits worksheet (with examples).

  • How to report your taxable benefits.

  • How to treat repayments that are more than the benefits you received during the year.

Social security benefits include monthly retirement, survivor, and disability benefits. They do not include supplemental security income (SSI) payments, which are not taxable.

Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits.

If you received these benefits during 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board. These forms show the amounts received and repaid, and taxes withheld for the year. You may receive more than one of these forms for the same year. You should add the amounts shown on all the Forms SSA-1099 and Forms RRB-1099 you receive for the year to determine the total amounts received and repaid, and taxes withheld for that year. See the Appendix at the end of Publication 915 for more information.

Note.

When the term “benefits” is used in this chapter, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits.

What is not covered in this chapter.   This chapter does not cover the tax rules for the following railroad retirement benefits.
  • Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits.

  • Tier 2 benefits.

  • Vested dual benefits.

  • Supplemental annuity benefits.

For information on these benefits, see Publication 575, Pension and Annuity Income.

  This chapter does not cover the tax rules for social security benefits reported on Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board. For information about these benefits, see Publication 519, U.S. Tax Guide for Aliens, and Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

  This chapter also does not cover the tax rules for foreign social security benefits. These benefits are taxable as annuities, unless they are exempt from U.S. tax or treated as a U.S. social security benefit under a tax treaty.

Useful Items - You may want to see:

Publication

  • 505 Tax Withholding and Estimated Tax

  • 575 Pension and Annuity Income

  • 590 Individual Retirement Arrangements (IRAs)

  • 915 Social Security and Equivalent Railroad Retirement Benefits

Forms (and Instructions)

  • 1040-ES Estimated Tax for Individuals

  • SSA-1099 Social Security Benefit Statement

  • RRB-1099 Payments by the Railroad Retirement Board

  • W-4V Voluntary Withholding Request

Are Any of Your Benefits Taxable?

To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of:

  1. One-half of your benefits, plus

  2. All your other income, including tax-exempt interest.

When making this comparison, do not reduce your other income by any exclusions for:

  • Interest from qualified U.S. savings bonds,

  • Employer-provided adoption benefits,

  • Foreign earned income or foreign housing, or

  • Income earned by bona fide residents of American Samoa or Puerto Rico.

Children's benefits.   The rules in this chapter apply to benefits received by children. See Who is taxed , later.

Figuring total income.   To figure the total of one-half of your benefits plus your other income, use Worksheet 11-1 later in this discussion. If the total is more than your base amount, part of your benefits may be taxable.

   If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable.

  
If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable.

Base amount.   Your base amount is:
  • $25,000 if you are single, head of household, or qualifying widow(er),

  • $25,000 if you are married filing separately and lived apart from your spouse for all of 2013,

  • $32,000 if you are married filing jointly, or

  • $-0- if you are married filing separately and lived with your spouse at any time during 2013.

Worksheet 11-1.   You can use Worksheet 11-1 to figure the amount of income to compare with your base amount. This is a quick way to check whether some of your benefits may be taxable.
Worksheet 11-1. A Quick Way To Check if Your Benefits May Be Taxable
A. Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. (If you received more than one form, combine the amounts from box 5 and enter the total.) A.  
Note. If the amount on line A is zero or less, stop here; none of your benefits are taxable this year.
B. Enter one-half of the amount on line A B.  
C. Enter your taxable pensions, wages, interest, dividends, and other taxable income C.  
D. Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D.  
E. Add lines B, C, and D E.  
Note. Compare the amount on line E to your base amount for your filing status. If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. If the amount on line E is more than your base amount, some of your benefits may be taxable. You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits.

Example.

You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. You also received a taxable pension of $22,800 and interest income of $500. You did not have any tax-exempt interest income. Your benefits are not taxable for 2013 because your income, as figured in Worksheet 11-1, is not more than your base amount ($32,000) for married filing jointly.

Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status.

Filled-in Worksheet 11-1. A Quick Way To Check if Your Benefits May Be Taxable
A. Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. (If you received more than one form, combine the amounts from box 5 and enter the total.) A. $11,000
Note. If the amount on line A is zero or less, stop here; none of your benefits are taxable this year.
B. Enter one-half of the amount on line A B. 5,500
C. Enter your taxable pensions, wages, interest, dividends, and other taxable income C. 23,300
D. Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. -0-
E. Add lines B, C, and D E. $28,800
Note. Compare the amount on line E to your base amount for your filing status. If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. If the amount on line E is more than your base amount, some of your benefits may be taxable. You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits.

Who is taxed.   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child.

Repayment of benefits.   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later.

  Your gross benefits are shown in box 3 of Form SSA-1099 or RRB-1099. Your repayments are shown in box 4. The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits are taxable.

Tax withholding and estimated tax.   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. If you choose to do this, you must complete a Form W-4V.

  If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. For details, see Publication 505 or the instructions for Form 1040-ES.

How To Report Your Benefits

If part of your benefits are taxable, you must use Form 1040 or Form 1040A. You cannot use Form 1040EZ.

Reporting on Form 1040.   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a.

Reporting on Form 1040A.   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a.

Benefits not taxable.   If you are filing Form 1040EZ, do not report any benefits on your tax return. If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a.

How Much Is Taxable?

If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.

Maximum taxable part.   Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
  • The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).

  • You are married filing separately and lived with your spouse at any time during 2013.

Which worksheet to use.   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or Form 1040A. You can use either that worksheet or Worksheet 1 in Publication 915, unless any of the following situations applies to you.
  1. You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits.

  2. Situation (1) does not apply and you take an exclusion for interest from qualified U.S. savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. In this situation, you must use Worksheet 1 in Publication 915 to figure your taxable benefits.

  3. You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. See Lump-sum election next.

Lump-sum election.   You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year.

  
This type of lump-sum benefit payment should not be confused 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.

  Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. 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 your taxable benefits.

Making the election.   If you received a lump-sum benefit payment in 2013 that includes benefits for one or more earlier years, follow the instructions in Publication 915 under Lump-Sum Election to see whether making the election will lower your taxable benefits. That discussion also explains how to make the election.

  
Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. Do not file an amended return for the earlier year.

Examples

The following are a few examples you can use as a guide to figure the taxable part of your benefits.

Example 1.

George White is single and files Form 1040 for 2013. He received the following income in 2013:

Fully taxable pension $18,600
Wages from part-time job 9,400
Taxable interest income 990
Total $28,990

George also received social security benefits during 2013. The Form SSA-1099 he received in January 2014 shows $5,980 in box 5. To figure his taxable benefits, George completes the worksheet shown here.

Filled-in Worksheet 1. Figuring Your Taxable Benefits

1. Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,980
2. Enter one-half of line 1 2,990
3. Combine the amounts from:  
  Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.  
  Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 28,990
4. Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-
     
5. Enter the total of any exclusions/adjustments for:
  • Adoption benefits (Form 8839, line 28),

  • Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and

  • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico

-0-
     
6. Combine lines 2, 3, 4, and 5 31,980
7. Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36.  
  Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0-
8. Is the amount on line 7 less than the amount on line 6?  
  No.
Stop
None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
  Yes.Subtract line 7 from line 6 31,980
9. If you are:
  • Married filing jointly, enter $32,000

  • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000

25,000
  Note. If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.  
10. Is the amount on line 9 less than the amount on line 8?  
  No.
Stop
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
 
  Yes.Subtract line 9 from line 8 6,980
11. Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 9,000
12. Subtract line 11 from line 10. If zero or less, enter -0- -0-
13. Enter the smaller of line 10 or line 11 6,980
14. Enter one-half of line 13 3,490
15. Enter the smaller of line 2 or line 14 2,990
16. Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- -0-
17. Add lines 15 and 16 2,990
18. Multiply line 1 by 85% (.85) 5,083
19. Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $2,990

The amount on line 19 of George's worksheet shows that $2,990 of his social security benefits is taxable. On line 20a of his Form 1040, George enters his net benefits of $5,980. On line 20b, he enters his taxable benefits of $2,990.

Example 2.

Ray and Alice Hopkins file a joint return on Form 1040A for 2013. Ray is retired and received a fully taxable pension of $15,500. He also received social security benefits, and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. Alice worked during the year and had wages of $14,000. She made a deductible payment to her IRA account of $1,000. Ray and Alice have two savings accounts with a total of $250 in taxable interest income. They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. They find none of Ray's social security benefits are taxable. On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b.

Filled-in Worksheet 1. Figuring Your Taxable Benefits

1. Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,600
2. Enter one-half of line 1 2,800
3. Combine the amounts from:  
  Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.  
  Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 29,750
4. Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-
     
5. Enter the total of any exclusions/adjustments for:
  • Adoption benefits (Form 8839, line 28),

  • Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and

  • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico

-0-
     
6. Combine lines 2, 3, 4, and 5 32,550
7. Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36.  
  Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 1,000
8. Is the amount on line 7 less than the amount on line 6?  
  No.
Stop
None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
  Yes.Subtract line 7 from line 6 31,550
9. If you are:
  • Married filing jointly, enter $32,000

  • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000

32,000
  Note. If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.  
10. Is the amount on line 9 less than the amount on line 8?  
  No.
Stop
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
 
  Yes.Subtract line 9 from line 8  
11. Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013  
12. Subtract line 11 from line 10. If zero or less, enter -0-  
13. Enter the smaller of line 10 or line 11  
14. Enter one-half of line 13  
15. Enter the smaller of line 2 or line 14  
16. Multiply line 12 by 85% (.85). If line 12 is zero, enter -0-  
17. Add lines 15 and 16  
18. Multiply line 1 by 85% (.85)  
19. Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b  

Example 3.

Joe and Betty Johnson file a joint return on Form 1040 for 2013. Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Joe's Form RRB-1099 shows $10,000 in box 5. Betty is a retired government worker and receives a fully taxable pension of $38,000. They had $2,300 in taxable interest income plus interest of $200 on a qualified U.S. savings bond. The savings bond interest qualified for the exclusion. They figure their taxable benefits by completing Worksheet 1. Because they have qualified U.S. savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500).

Filled-in Worksheet 1. Figuring Your Taxable Benefits

Before you begin:
If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a.
Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). None of your benefits are taxable for 2013. For more information, see Repayments More Than Gross Benefits.
If you are filing Form 8815, Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Instead, include the amount from Schedule B (Form 1040A or 1040), line 2.
1. Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $10,000
2. Enter one-half of line 1 5,000
3. Combine the amounts from:  
  Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.  
  Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 40,500
4. Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-
     
5. Enter the total of any exclusions/adjustments for:
  • Adoption benefits (Form 8839, line 28),

  • Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and

  • Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico

-0-
     
6. Combine lines 2, 3, 4, and 5 45,500
7. Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36.  
  Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0-
8. Is the amount on line 7 less than the amount on line 6?  
  No.
Stop
None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
  Yes.Subtract line 7 from line 6 45,500
9. If you are:
  • Married filing jointly, enter $32,000

  • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000

32,000
  Note. If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.  
10. Is the amount on line 9 less than the amount on line 8?  
  No.
Stop
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
 
  Yes.Subtract line 9 from line 8 13,500
11. Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 12,000
12. Subtract line 11 from line 10. If zero or less, enter -0- 1,500
13. Enter the smaller of line 10 or line 11 12,000
14. Enter one-half of line 13 6,000
15. Enter the smaller of line 2 or line 14 5,000
16. Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- 1,275
17. Add lines 15 and 16 6,275
18. Multiply line 1 by 85% (.85) 8,500
19. Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $6,275

More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b.

Deductions Related to Your Benefits

You may be entitled to deduct certain amounts related to the benefits you receive.

Disability payments.   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Claim the deduction or credit in the same way explained under Repayments More Than Gross Benefits , later.

Legal expenses.   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax.

  Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23.

Repayments More Than Gross Benefits

In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Do not use a worksheet in this case. If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year.

If you have any questions about this negative figure, contact your local SSA office or your local RRB field office.

Joint return.   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. You do this to get your net benefits when figuring if your combined benefits are taxable.

Example.

John and Mary file a joint return for 2013. John received Form SSA-1099 showing $3,000 in box 5. Mary also received Form SSA-1099 and the amount in box 5 was ($500). John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable.

Repayment of benefits received in an earlier year.   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year.

Deduction $3,000 or less.   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Claim it on Schedule A (Form 1040), line 23.

Deduction more than $3,000.    If this deduction is more than $3,000, you should figure your tax two ways:
  1. Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28.

  2. Figure your tax for 2013 in the following steps.

    1. Figure the tax without the itemized deduction included on Schedule A, line 28.

    2. For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Then refigure the tax for that year.

    3. Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts.

    4. Subtract the result in (c) from the result in (a).

Compare the tax figured in methods (1) and (2). Your tax for 2013 is the smaller of the two amounts. If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. Check box d and enter “I.R.C. 1341” in the space next to that box. If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28.


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