Lump Sum Problem

Today TaxMama hears from Scott in Utah, who’s upset . “My wife and I E-filed using TurboTax online deluxe, reporting a lump sum Social Security payment. We had a refund coming from both fed and state. Then we got an IRS letter telling us ‘We changed the amount of taxable social security benefits on line 20b of your form 1040 because there was an error in the computation of the taxable amount.’ Now we owe a ton of money – and TurboTax says it will take six weeks to review my situation. What do we do now?”

Dear Scott,

Call up IRS and ask them to put a 60-day hold on your file. Tell them that you are working with
your software provider to find the problem.

Mark the date on your calendar – and also mark it on your calendar 2 weeks before the deadline – so you remember to follow up with TurboTax while there’s still time.

Meanwhile, do pester Turbo Tax and try to run the Lump Sum calculation yourself to see if the number on your tax return was correct.

Call TurboTax regularly and make a friendly, but persistent pest of yourself. Remind them that they told last year, that their program WILL handle this computation properly – so why should you have to wait six weeks for them to get this to work for you?

While you’re waiting, try to figure out the calculation yourself. Follow IRS’s worksheet on the Social Security lump sum calculation. See Lump Sum – example . If your manually computed result is the same as the amount on your tax return, mail that to IRS with the notice and explain that this was a lump sum payment, not regular Social Security Income.

And remember, you can find answers to all kinds of questions about IRS notices and other tax issues, free. Where? Where else? At

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