14295: 1040 - Lump Sum Social Security Distributions

You can use the LSSA screen to calculate lump sum Social Security distributions. On the LSSA screen, enter the year (YYYY) that this lump-sum amount is for. Then, enter the amount of Social Security benefits received for that year indicated. Also include the amount from the lump sum for the current tax year. 

IMPORTANT: Lump-sum amounts entered on the LSSA screen should not be included in the amount entered on screen SSA. Current year SSA distributions are entered on the SSA screen. 

This screen can be accessed from:

• The Income tab of the data entry menu,
• Via the Lump Sum Benefits link on screen 3, or
• By typing LSSA in the selector field of the data entry menu and pressing the Enter key on the keyboard.

Use the LSSA screen to enter lump sum distributions of Social Security benefits the taxpayer received in 20YY. Be sure to review the field help (F1) highlighted above. Drake Tax generates the required Lump Sum Benefits worksheets based on what is entered in data entry. These worksheets are:

• Wks SSB-1
• Wks SSB-2
• Wks SSB-3
• Wks SSB-4

Preparers can override the amounts calculated on the Lump Sum Benefits worksheets using the line 5a (line 20a in Drake17 & Drake16) override fields on screen 3. No Lump Sum Benefits worksheets are produced if you use the overrides. 

Note: The LSE literal only prints when the lump sum election is of benefit to the taxpayer and is being used on the return. If the amount on Wks SSB-4, line 21 is smaller than the amount on Wks SSB-1, line 19, then it will be used. See Pub. 915 for details and other information about using the lump sum election. 

In Drake15 and prior, you have a couple different choices for data entry:

1. Treat the entire amount in Box 5 as a current-year benefit. In the 20a Net Social Security benefits received for 20YY field on screen 3, enter the total from Box 5. That goes to Worksheet 1, WK_SSB, from which the taxable amount, if any, flows to the return, line 20b.
2. If the taxpayer qualifies to use the Lump-Sum Election Method, figure the taxable lump-sum benefits separately. This may reduce tax liability. Manually complete Worksheets 2, 3 and 4 to determine if the taxpayer qualifies (the software does not calculate these worksheets). If so,
   1. Subtract the lump-sum benefits from the Box 5 total and enter the remainder, the current year benefits, on screen 3, in the field 20a Net Social Security benefits received for 20YY.
   2. Enter the total lump-sum benefits on screen 3, in the field Lump-sum benefits earlier year - TOTAL received.
   3. Enter the taxable portion from worksheet 4 on screen 3, in the field Lump-sum benefits earlier year - TAXABLE portion. The taxable portion is added to the total that flows to the return, line 20b. The literal LSE also appears on the line.

Worksheets 2, 3 and 4 are available in the "Worksheets" section of Pub. 915, Social Security and Equivalent Railroad Retirement Benefits. The worksheets are also available in the software at Tools > Blank Forms. Click Search, enter LUMP in the Form Search dialog box and click Search.