Can We Request An Amendment To Our Tax Returns If We Paid Taxes On Benefits That Must Be Repaid?

Jul 24 2018 - 9:27am

My wife took S/S in 2017 at age 62. As a corporate executive, she retired/cashed out $400K which caused her Social Security benefits of $25,200 to be taxed @85%. We now have received a bill from the SSA requesting a payback of $25,278. Can we request an amendment to our 2017 or 2018 tax return as we paid over $7K (35% tax bracket) on the monies received that the SSA is asking for it back??

Hi,

My expertise is limited to Social Security benefits, so I'm unable to answer questions about taxes. My understanding, though, is that if you receive benefits in one year and pay them back in a different year you still must pay any taxes due for the year of receipt, but you could then potentially claim a deduction or credit in the year of repayment. I believe that this link to IRS's website may be helpful to you: https://www.irs.gov/irm/part21/irm_21-006-006r#idm139996515081552.

Based on your explanation of events, however, it's not clear whether or not the overpayment notice that Social Security sent you is correct. If your wife didn't work after she started drawing Social Security but her earnings exceeded Social Security's limits (https://www.ssa.gov/planners/retire/whileworking.html) due to receipt of some type of payment related to work she performed before filing for her Social Security benefits, then the past earnings may be excludable from counting toward Social Security's earnings test. I would suggest reading the following Social Security publication to see if this may be true in your wife's case: https://www.ssa.gov/planners/retire/whileworking.html.

Best, Jerry