This tool calculates the amount of Social Security that is taxable when you receive one or more lump sum payments
A lump sum Social Security payment occurs when you receive a payment for benefits that should have been paid earlier. If you receive a lump sum payment, it will be shown on your form SSA-1099 or RRB-1099 in box 3. It will be listed as an amount and the year that payment is for.
You must include a lump sum payment received in the current tax year in your current income even if the payment is for benefits from a previous year; you do not file an amended return. There are two methods for determining the amount of the payment that is taxable, and you can use whichever method results in the least amount of taxable Social Security benefits.
The standard calculation, is to calculate the taxable amount based on receiving all the payments in the current year. However, if the lump sum payment is for a previous year, you may be able to reduce the taxable amount by determining how much of the payment would have been taxable if you had received it in the year it was intended. You will need information from your previous year's tax return if you choose to use this calculation method.