- quote -

Not really. The current year of the person making the
repayment still has a zero for gross benefit received during
that same year. It still goes on 1040 Line 20b, not
Schedule A, and if that results in a negative amount, so be
it. Because the repayment is in Section 86, it is included
in the computation of gross income, not a later subtraction
from it to arrive at AGI or TI.

In the case I cited above, the hopping from decedent to
successor is not relevant to the treatment.

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- quote -

There was a benefit paid. It occurred in the prior year.
That's why we have a repayment in excess of benefits paid in
the current year.

- quote -

Apples and oranges to the current set of facts.

--
Alan
http://taxtopics.net

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- quote -

There can't be a "repayment" until there's been a benefit
paid (to someone).

- quote -

I had this type of situation about 15 years ago (back when
SS was only 50% taxable). What happened is that the SS
receiver died and the successor paid back the amount that SS
sent after death that the decedent wasn't entitled to (SS
had gotten behind and paid a lump sum that included periods
after death). In that case, the repayment is NOT properly in
the decedent's tax year because it came after the close
(despite a 1099-SSA listing the part that accrued prior to
death).

The IRS ALLOWED the deduction to the successor on audit,
despite that the successor's gross income had no SS benefit
at all. Because of grantor trusts and whatnot, the estate
was almost instantly settled except for taxes (and by the
time the audit came around, the taxes had all been settled
too).

Whether this is correct is one thing. However, that is how
the IRS dealt with it then (via office audit).

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D. Stussy wrote:
- quote -

I believe you are in error in how you are interpreting that
clause. Here's why. Let's say the taxpayer never received
any taxable social security in prior years. He then makes
repayments in excess of benefits received such that Box 5 is
negative. If his modified AGI in that year triggers the
formula, your interpretation would create negative income on
an amount that was never taxed. No way!

I believe the correct interpretation is that benefits will
be reduced for repayments. The formula for computing how
much of a benefit is taxable depends upon one having a
benefit. No net benefit, no taxable soc. security. When
repayments exceed benefits, you use the claim of right rules
that we all know stinks.

--
Alan
http://taxtopics.net

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A.G. Kalman wrote:
- quote -

I disagree. Although the "claim of right" deduction
(subject to the 2% AGI floor since it's less than $3k) seems
logical and would the correct way to handle this for the
general case, IRC 86(d)(2)(A) trumps as it addresses the
specific case of social security repayments. It alows a
direct deduction against the amount reportable as income to
arrive at gross income.

However, be careful about this: The last time (a decade
ago) I had a situation involving a social security
repayment, the service center "math error corrected" it back
to 50% (the percentage at the time), and it took filing a
1040X then going through an examination of the claim to get
it corrected, despite the fact that the SSA's receipt for
the repayment was attached to the return (one of the very
few times that evidence was ever attached - because the
1099-SSA for some reason DID NOT reflect the repayment).

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Nan Eklund wrote:

- quote -

What you have is a bug in the software. (Taxwise also does
this.) The social security income line can never be less
than zero. You must use the formula for repayments to
compute the tax benefit. This is the one that says if the
amount of repayment of an item previously declared as income
is less than $3000 it's a Misc. Itemized Deduction subject
to the 2% limitation. You can deduct $1700 on Line 22 of
Schedule A. Naturally, if the taxpayer does not itemize or
if 2% of AGI does not allow the deduction, they are just
screwed by the system.

I'm almost sure that if you tried to e-file that return with
a negative SS amount, it would reject. (Never tried it
myself, though!)

--

Alan
http://taxtopics.net

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Nan Eklund wrote:

- quote -

Wellll... think about it.

She had 2000 of which 1700 was taxable before? so she paid
tax on the 1700. Now, year later and the 2000 is repaid, so
her benefit should be less tax on the 1700.

Cheer$,
Harlan Lunsford

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Client had $2000 Social Security in 2002 of which $1700 was
taxable. Her SSA-1099 for 2003 showed a negative $2000 (had
to pay it back). My software accepted the negative and took
$1700 off her income! Never had this before. Am I correct?
Seems fair, but taxes ain't always fair!

Nan, EA in LA

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