After a 10+ year battle with Social Security, including escalating appeals, my husband was approved for disability benefits. In addition, our minor son (age 11) also receives a dependent benefit.

As the battle waged on for more than a decade, my son received a substantial lump-sum payment. I am using TurboTax to complete our tax returns. According to the software, my son's return must be filed separately, as gross income (earned and unearned) is in excess of $1,250, and we do not qualify to file form 8814 to include his income on our return.

I then checked the IRS website, specifically Publication 501. As one-half of the amount reported on the SSA-1099 exceeds $25,000, it would appear that he must file an independent return.

My concern is that nearly 90% of the amount listed on the 1099 is for prior tax years; should I only look at the amount that represents 2011 SSDI income when determining whether a return should be filed in his name? Besides the SSDI, he has minimal interest and dividend income from child savings accounts.

I did run through the data entry in TurboTax, noting the amounts received as attributed to previous tax years, and find that there is no tax liability for him. If I do end up filing a federal return, with a zero tax liability, should I also file a state return (we are in New Jersey) with zero liability as well?

Any advice from those "in the know" is greatly appreciated.

Thanks in advance,

Tina

I then checked the IRS website, specifically Publication 501. As one-half of the amount reported on the SSA-1099 exceeds $25,000, it would appear that he must file an independent return.

Check Pub 915. There's a special way of dealing with these lump sum payments.

Phil
Rule Your Retirement Home Fool

Turbotax prepared a fed return based on the special way handling SS lump sums to avoid tax liability. Without electing this method by filing the return, your son must file due to a required return to pay a tax.

Sorry, I don't know about NJ return.

If I do end up filing a federal return, with a zero tax liability, should I also file a state return (we are in New Jersey) with zero liability as well?

IMO, go ahead and file both.

It's only going to cost you a few cents to print out the pages and the cost of a stamp to send it in.

(Would I pay $8 or whatever for e-file? No.)

I did run through the data entry in TurboTax, noting the amounts received as attributed to previous tax years, and find that there is no tax liability for him. If I do end up filing a federal return, with a zero tax liability, should I also file a state return (we are in New Jersey) with zero liability as well?

NJ returns aren't necessary because Social Security is neither reportable nor taxable on a NJ return. NJ also does not require a return if gross income is less than $10000. If his NJ gross income were approaching $10K, I would consider filing a return just to establish a statute of limitations for the state to question the return.

Ira

Tina:

Since some of the payments were for years prior to this year you can allocate each year to appropriate years return. There are special forms for this and I do not have this in front me.

Dusty