What and how do you handle lump sum payments for disability? I was awarded Social Security Disability starting in August 2017. I was given a $11, 000 lump sum check in January of 2018. $3000 of that 11,000 was taken to pay the attorney so I only received a little over $7000.
My Form SSA-1099 reflects that extra $11,000 in my total benefits for 2018 (Box 5). How do I handle the $11,000 and $3000 on my 2018 income taxes? One of the tax programs says I count it as income but that then shows that I will owe $8000 in federal taxes over what I have paid. Another one says I will owe $4000 over what I have paid. And a third says, they can't do it and I need to contact a tax accountant.
I called several tax accountants in the area (small rural area) and no one knows how to handle it. One said file an amended 2017, one said count it as income and another said they didn't know.
My husband and I are both on SS (his regular, my disability). Frankly, we don't have $4000 or $8000 to pay. And why an I paying as much in taxes as I received as a lump sum ? More if you take into account the $3000 that was paid to the attorney.
My husband and I neither work, have no other income, no investments or no IRA. We onw a home that has a mortgage and 2 20+ year old vehicles. Our sole income is SS.
I am so confused. Thanks.