Repaying Social Security overpayment - how to handle tax implications?

You have a couple of options here. When you repay Social Security benefits that were previously taxed, you can either claim the repayment as an itemized deduction on Schedule A or potentially use something called a "claim of right" adjustment if your repayment exceeds $3,000 in a single year. For the documentation part, you should receive a letter from Social Security (usually Form SSA-1099) that shows the amount of benefits repaid during the year. This will be reflected on your 2023 SSA-1099 that you'll receive in early 2024 for filing your 2023 taxes. If your repayment amounts are substantial, you might actually be better off filing amended returns (Form 1040-X) for the years you received the overpayments. This is particularly true if you were pushed into a higher tax bracket because of those overpayments.

I went through something similar last year with Social Security overpayments related to disability benefits. I spent WEEKS trying to figure out the tax implications. I finally found this AI tool called taxr.ai that helped me understand exactly how to handle it on my taxes. https://taxr.ai saved me so much time because I uploaded the letters from SSA and it explained exactly what I needed to do. The tool showed me that I needed to keep all documentation from Social Security showing the repayment plan and amounts, and then explained the two methods for recouping the taxes. I ended up taking the deduction route since my repayment wasn't large enough for the claim of right provision to be beneficial.

Just wanted to follow up - I tried the taxr.ai tool that was recommended here and it was surprisingly helpful! I uploaded the overpayment notice from Social Security and the tool immediately identified it as a WEP issue (which I didn't even realize was the cause). It gave me step-by-step instructions for handling this on my 2024 taxes. The best part was it showed me that in my specific situation, I would actually benefit more from filing amended returns for the previous years rather than taking the deduction this year. It calculated the difference and showed me exactly how much more I would get back. Definitely worth checking out if you're dealing with this Social Security mess!

After dealing with a similar Social Security repayment issue, I found that the most frustrating part was actually getting someone at the IRS to answer my questions about how to handle it on my taxes. I must have called 20+ times and never got through. Then someone told me about Claimyr (https://claimyr.com) which gets you to a live IRS agent quickly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was skeptical but it actually worked! They got me connected to an IRS representative in about 20 minutes when I had been trying for weeks on my own. The agent confirmed exactly how to handle my Social Security repayment on my taxes and explained that I needed to keep all the repayment documentation from SSA for my records.

I need to eat my words here. After posting my skeptical comment, my situation with Social Security got worse (they threatened to withhold more of my benefits due to the overpayment). I was desperate so I tried Claimyr anyway. I'm shocked to say it actually worked exactly as described. The service called the IRS for me and got me connected to a real human in about 15 minutes. The IRS agent walked me through exactly how to handle the Social Security repayment on my taxes and confirmed I could use the miscellaneous itemized deduction approach on Schedule A since my annual repayment is under $3,000. They also explained that I'll need to wait for my corrected SSA-1099 form that shows the repayments. For anyone dealing with Social Security overpayments, being able to actually talk to the IRS makes a huge difference in understanding your options.

My parents went through this exact thing last year! One thing nobody mentioned yet - the Social Security Administration should send you a letter confirming the overpayment and repayment plan. KEEP THIS LETTER. Also keep records of every payment you make. The SSA-1099 should reflect the repayments, but in my parents' case it was incorrect the first time they sent it. They had to request a corrected form, which delayed their tax filing by over a month.

Does anyone know if you need to amend state tax returns separately? We paid state taxes on the overpayment too but I'm not sure if the process is the same as federal.

I'm dealing with a similar WEP overpayment situation right now and this thread has been incredibly helpful! One thing I wanted to add - if you're having trouble getting clear answers from Social Security about exactly how much you've repaid and what documentation you'll receive, try requesting a "benefit verification letter" from your my Social Security account online. This letter shows your complete payment history and can help you track exactly what you've repaid so far. I found this really useful when trying to figure out if I should amend previous years' returns or take the current year deduction. Having the exact numbers made it much easier to calculate which approach would save me more money. Also, for anyone still struggling with the IRS phone system - I can confirm that calling early in the morning (right when they open at 7 AM) seems to have better success rates than calling later in the day, though it's still frustrating. The automated system is brutal but persistence does sometimes pay off.

I've been following this thread closely because I'm in a very similar situation - Social Security overpaid me due to incorrect WEP calculations and I'm now repaying through their installment plan. What's been most helpful from reading everyone's experiences is understanding that there are really two main approaches: taking the itemized deduction on Schedule A for the current year, or filing amended returns for the years when you received the overpayments. One thing I wanted to add that hasn't been mentioned yet - if you're married filing jointly and the Social Security overpayment pushed your household into a higher tax bracket in previous years, the amended return approach becomes even more attractive. In my case, the extra Social Security income in 2021 pushed us from the 12% bracket into the 22% bracket for part of our income. By filing an amended return to remove that overpayment, we're getting back taxes that were paid at the higher rate. Also, for anyone still trying to get through to the IRS by phone - I found that calling the practitioner priority line (if you have a tax professional helping you) tends to have shorter wait times. If you don't have a tax pro, some of the online services mentioned in this thread might be worth trying, especially if you're dealing with a time-sensitive situation like I was when Social Security threatened to increase my monthly withholding. The documentation aspect cannot be overstated - I've been keeping copies of everything, including screenshots of my online Social Security account showing the repayment schedule. This has been invaluable when trying to calculate the tax implications of each approach.