US Internal Revenue Service: p915--2003

8/14/2019 US Internal Revenue Service: p915--2003

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ContentsDepartment of the TreasuryInternal Revenue Service

Important Reminder . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Publication 915Are Any of Your Benefits Taxable? . . . . . . . . . . . . 2

Cat. No. 15320P

How To Report Your Benefits . . . . . . . . . . . . . . . . 5

How Much Is Taxable? . . . . . . . . . . . . . . . . . . . . . . 5

Social Security Lump-Sum Election . . . . . . . . . . . . . . . . . . . . . . . . 10Deductions Related to Your Benefits . . . . . . . . . . 14andWorksheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Equivalent Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . . 26RailroadIndex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

RetirementImportant Reminder

Benefits Photographs of missing children. The Internal Reve-nue Service is a proud partner with the National Center forMissing and Exploited Children. Photographs of missingFor use in preparingchildren selected by the Center may appear in this publica-tion on pages that would otherwise be blank. You can help2003 Returnsbring these children home by looking at the photographsand calling 1800THELOST (18008435678) ifyou recognize a child.

IntroductionThis publication explains the federal income tax rules forsocial security benefits and equivalent tier 1 railroad retire-ment benefits. It is prepared through the joint efforts of theInternal Revenue Service, the Social Security Administra-tion (SSA), and the U.S. Railroad Retirement Board (RRB).

Social security benefits include monthly survivor anddisability benefits. They do not include supplemental se-curity income (SSI) payments, which are not taxable.

Equivalent tier 1 railroad retirement benefits are the partof tier 1 benefits that a railroad employee or beneficiarywould have been entitled to receive under the social secur-ity system. They are commonly called the social securityequivalent benefit (SSEB) portion of tier 1 benefits.

If you received these benefits during 2003, you shouldhave received a Form SSA1099, Social Security BenefitStatement, or Form RRB 1099, Payments by the RailroadRetirement Board, (Form SSA1042S, Social SecurityBenefit Statement, or Form RRB1042S, Statement forNonresident Alien Recipients of: Payments by the Railroad

Get forms and other information Retirement Board, if you are a nonresident alien) showingfaster and easier by: the amount.

Internet www.irs.gov or FTP ftp.irs.govNote. When the term benefits is used in this publica-

FAX 7033689694 (from your fax machine) tion, it applies to both social security benefits and theSSEB portion of tier 1 railroad retirement benefits.


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What is covered in this publication. This publication Forms (and Instructions)covers the following topics:

1040ES Estimated Tax for Individuals Whether any of your benefits are taxable,

SSA1099 Social Security Benefit Statement How much is taxable,

SSA1042S Social Security Benefit Statement How to report taxable benefits,

RRB1099 Payments by the Railroad Retirement How to treat lump-sum benefit payments, and Board

Deductions related to your benefits, including a de- RRB1042S Statement for Nonresident Alienduction you can claim if your repayments are more Recipients of: Payments by the Railroadthan your gross benefits. Retirement Board

The Appendixat the end of this publication explains items W4V Voluntary Withholding Requestshown on your Form SSA1099, SSA1042S,

See How To Get Tax Helpnear the end of this publica-RRB1099, or RRB 1042S.

tion for information about getting these publications andforms.

What is not covered in this publication. This publica-tion does not cover the tax rules for the following railroadretirement benefits:

Are Any of Your Non-social security equivalent benefit (NSSEB) por-tion of tier 1 benefits, Benefits Taxable?

Tier 2 benefits,

To find out whether any of your benefits may be taxable, Vested dual benefits, andcompare the base amount(explained later) for your filing

Supplemental annuity benefits. status with the total of:

For information on these taxable pension benefits, see1) One-half of your benefits, plusPublication 575, Pension and Annuity Income.

2) All your other income, including tax-exempt interest.This publication also does not cover the tax rules forforeign social security or railroad retirement benefits. When making this comparison, do not reduce your otherThese benefits are taxable as annuities, unless they are income by any exclusionsfor:exempt from U.S. tax or treated as a U.S. social securitybenefit under a tax treaty. Interest from qualified U.S. savings bonds,

Employer-provided adoption benefits,Comments and suggestions. We welcome your com-

ments about this publication and your suggestions for

Foreign earned income or foreign housing, orfuture editions. Income earned in American Samoa or Puerto Rico

You can e-mail us at *[email protected]. Please putby bona fide residents.

Publications Comments on the subject line.You can write to us at the following address:

The SSA issues Form SSA1099 and FormInternal Revenue Service SSA1042S. The RRB issues Form RRB1099Individual Forms and Publications Branch and Form RRB1042S. These forms (tax state-

TIP

SE:W:CAR:MP:T:I ments) report the amounts paid and repaid, and taxes1111 Constitution Ave. NW withheld for a tax year. You may receive more than one ofWashington, DC 20224 these forms for the same tax year. You should add the

amounts shown on all forms you receive from the SSAand/or RRB for the same tax year to determine the total

We respond to many letters by telephone. Therefore, it amounts paid and repaid, and taxes withheld for that taxwould be helpful if you would include your daytime phone year. See Appendix, at the end of this publication for morenumber, including the area code, in your correspondence. information.

Each original Form RRB1099 is valid unless it hasUseful Items

been corrected. The RRB will issue a corrected FormYou may want to see:

RRB1099 if there is an error in the original. A correctedForm RRB1099 is indicated as CORRECTED and re-

Publicationplaces the corresponding original Form RRB1099. Youmust use the latest corrected Form RRB1099 you re- 505 Tax Withholding and Estimated Taxceived and any original Form RRB1099 that the RRB has

575 Pension and Annuity Incomenot corrected when you determine what amounts to report

590 Individual Retirement Arrangements (IRAs) on your tax return.

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Figuring total income. To figure the total of one-half of benefits of $3,500 in box 5. You also received a taxableyour benefits plus your other income, use the worksheet pension of $19,000 and interest income of $500. You didlater in this discussion. If the total is more than your base not have any tax-exempt interest income. Your benefitsamount, part of your benefits may be taxable. are nottaxable for 2003 because your income, as figured

in the following worksheet, is not more than your baseIf you are married and file a joint return for 2003, you andamount ($32,000) for married filing jointly.your spouse must combine your incomes and your benefits

to figure whether any of your combined benefits are tax- Even though none of your benefits are taxable, youable. Even if your spouse did not receive any benefits, you must file a return for 2003 because your taxable grossmust add your spouses income to yours to figure whether income ($19,500) exceeds the minimum filing requirementany of your benefits are taxable. amount for your filing status.

If the only income you received during 2003 wasA. Write in the amount from box 5of all your Formsyour social security or the SSEB portion of tier 1

SSA 1099 and RRB1099. Include the fullrailroad retirement benefits, your benefits gener-TIP

amount of any lump-sum benefit paymentsally are not taxable and you probably do not have to file a received in 2003, for 2003 and earlier years. (Ifreturn. If you have income in addition to your benefits, you you received more than one form, combine the

amounts from box 5 and write in the total.) . . . . . A. $11,000may have to file a return even if none of your benefits areNote. If the amount on line A is zero or less, stop here;taxable.none of your benefits are taxable this year.

B. Enter one-half of the amount on line A . . . . . . . . B. 5,500Base amount. Your base amount is:

C. Add your taxable pensions, wages, interest,dividends, and other taxable income and write in

$25,000 if you are single, head of household, orthe total . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. 19,500

qualifying widow(er),D. Write in any tax-exempt interest income (such as

interest on municipal bonds) plus any exclusions $25,000 if you are married filing separately and lived from income (listed earlier). . . . . . . . . . . . . . . . D. 0 apartfrom your spouse for allof 2003,E. Add lines B, C, and D and write in the total . . . . . E. $25,000

$32,000 if you are married filing jointly, orNote. Compare the amount on line E to yourbase amount for your filing status. Ifthe amount on line E equals or is less than thebase amount for your filing status, $0 if you are married filing separately and livednone of your benefits are taxable this year. If the amount on line E is more thanwithyour spouse at any time during 2003. yourbase amount, some of your benefits may be taxable. You then need tocompleteWorksheet 1, shown later.

Worksheet. You can use the following worksheetto figure the amount of income to compare with Who is taxed. The person who has the legal right toyour base amount. This is a quick way to check receive the benefits must determine whether the benefits

whether some of your benefits may be taxable.are taxable. For example, if you and your child receivebenefits, but the check for your child is made out in your

name, you must use only your part of the benefits to seeA. Write in the amount from box 5of all your FormsSSA 1099 and RRB 1099. Include the full whether any benefits are taxable to you. One-half of theamount of any lump-sum benefit payments part that belongs to your child must be added to yourreceived in 2003, for 2003 and earlier years. (If you

childs other income to see whether any of those benefitsreceived more than one form, combine theamounts from box 5 and write in the total.) . . . . . A. are taxable to your child.

Note. If the amount on line A is zero or less, stop here;none of your benefits are taxable this year.

Repayment of benefits. Any repayment of benefits youB. Enter one-half of the amount on line A . . . . . . . . B. made during 2003 must be subtracted from the grossC. Add your taxable pensions, wages, interest, benefits you received in 2003. It does not matter whether

dividends, and other taxable income and write in the repayment was for a benefit you received in 2003 or inthe total . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.

an earlier year. If you repaid more than the gross benefitsD. Write in any tax-exempt interest income (such as you received in 2003, see Repayments More Than Gross

interest on municipal bonds) plus any exclusionsBenefits, later.from income (listed earlier). . . . . . . . . . . . . . . . D.

Your gross benefits are shown in box 3 of FormE. Add lines B, C, and D and write in the total . . . . . E. SSA1099 or Form RRB1099. Your repayments areNote. Compare the amount on line E to yourbase amount for your filing status. If

shown in box 4. The amount in box 5 shows your netthe amount on line E equals or is less than thebase amount for your filing status,none of your benefits are taxable this year. If the amount on line E is more than benefits for 2003 (box 3 minus box 4). Use the amount inyourbase amount, some of your benefits may be taxable. You then need to

box 5 to figure whether any of your benefits are taxable.completeWorksheet 1, shown later.

Example. In 2002, you received $3,000 in social secur-ity benefits, and in 2003 you received $2,700. In MarchExample. You and your spouse (both over 65) are filing2003, SSA notified you that you should have received onlya joint return for 2003 and you both received social security$2,500 in benefits in 2002. During 2003, you repaid $500benefits during the year. In January 2004, you received ato SSA. The Form SSA1099 you received for 2003Form SSA1099 showing net benefits of $7,500 in box 5.shows $2,700 in box 3 (gross amount) and $500 in box 4Your spouse received a Form SSA1099 showing net

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(repayment). The amount in box 5 shows your net benefits The SSA should not have withheld federal income taxof $2,200 ($2,700 minus $500). from my social security benefits because I am a U.S. lawful

permanent resident and my green card has been neitherTax withholding and estimated tax. You can choose to revoked nor administratively or judicially determined tohave federal income tax withheld from your social security have been abandoned. I am filing a U.S. income tax returnbenefits and/or the SSEB portion of your tier 1 railroad for the tax year as a resident alien reporting all of myretirement benefits. If you choose to do this, you must worldwide income. I have not claimed benefits for the taxcomplete a Form W4V. You can choose withholding at year under an income tax treaty as a nonresident alien.7%, 10%, 15%, or 25% of your total benefit payment.

If you do not choose to have income tax withheld, you Nonresident aliens. A nonresident alien is an individual

may have to request additional withholding from other who is not a citizen or resident of the United States. If youincome or pay estimated tax during the year. For details, are a nonresident alien, the rules discussed in this publica-get Publication 505 or the instructions for Form 1040ES. tion do not apply to you. Instead, 85% of your benefits are

taxed at a 30% rate, unless exempt (or subject to a lowerU.S. citizens residing abroad. U.S. citizens who reside rate) by treaty. You will receive a Form SSA1042S orin the following countries are exempt from U.S. tax on their Form RRB1042S showing the amount of your benefits.benefits. These forms will also show the tax rate and the amount of

tax withheld from your benefits. Canada.Under tax treaties with the following countries, residents

Egypt. of these countries are exempt from U.S. tax on their bene-fits. Germany.

Ireland. Canada.

Israel. Egypt.

Italy. (You must also be a citizen of Italy for the Germany.exemption to apply.)

Ireland. Romania.

Israel.

The SSA will not withhold U.S. tax from your benefits if Italy.you are a U.S. citizen.

Japan.The RRB will withhold U.S. tax from your benefits un-

Romania.less you claim an exemption from withholding. For informa-tion on how to claim an exemption from withholding, see

The United Kingdom.Exemption from withholding under Nonresident aliens,later.

Under a treaty with India, benefits paid to individuals

who are both residents and nationals of India are exemptLawful permanent residents. For U.S. income tax pur-from U.S. tax if the benefits are for services performed forposes, lawful permanent residents (green card holders)the United States, its subdivisions, or local governmentare considered resident aliens until their lawful permanentauthorities.resident status under the immigration laws is either taken

If you are a resident of Switzerland, your total benefitaway or is administratively or judicially determined to haveamount will be taxed at a 15% rate.been abandoned. Social security benefits paid to a green

For more information, get Publication 519, U.S. Taxcard holder are not subject to 30% withholding. If you are aGuide for Aliens.green card holder and tax was withheld in error on your

social security benefits because you have a foreign ad- Exemption from withholding. If your social securitydress, the withholding tax is refundable by the Social benefits are exempt from tax because you are a resident ofSecurity Administration (SSA) or the IRS. SSA will refund one of the treaty countries listed, the SSA will not withholdtaxes erroneously withheld if the refund can be processed U.S. tax from your benefits.during the same calendar year in which the tax was with-

If your railroad retirement benefits are exempt from taxheld. If SSA cannot refund the taxes withheld, you must file because you are a resident of one of the treaty countriesa Form 1040 or 1040A with the Internal Revenue Service

listed, you can claim an exemption from withholding byCenter, Philadelphia, PA 19255 to determine if you are

filing Form RRB1001, Nonresident Questionnaire, withentitled to a refund. You must also attach the following

the RRB. Contact the RRB to get this form.information to your Form 1040 or 1040A:

Canadian or German social security benefits paid to A copy of the Form SSA-1042S, Social SecurityU.S. residents. Under income tax treaties with CanadaBenefit Statement,and Germany, social security benefits paid by those coun-

A copy of the green card, andtries to U.S. residents are treated for U.S. income tax

A signed declaration that includes the following purposes as if they were paid under the social securitystatements: legislation of the United States. If you receive social secur-

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ity benefits from Canada or Germany, include them on line1) The total of one-half of your benefits and all your1 of Worksheet 1, shown later.

other income is more than $34,000 ($44,000 if youare married filing jointly).

2) You are married filing separately and lived withHow To Report Your Benefitsyour spouseat any time during 2003.

If part of your benefits are taxable, you must use FormWhich worksheet to use. A worksheet to figure your1040 or Form 1040A. You cannot use Form 1040EZ.taxable benefits is in the instructions for your Form 1040 or

Reporting on Form 1040. Report your net benefits (the1040A. You can use either that worksheet or Worksheet 1

amount in box 5 of your Form SSA1099 or Form in this publication, unless any of the following situationsRRB1099) on line 20a and the taxable part on line 20b. If

applies to you.you are married filing separately and you lived apart fromyour spouse for all of 2003, also enter D to the right of the 1) You contributed to a traditional individual retirementword benefits on line 20a. arrangement (IRA) and you or your spouse is cov-

ered by a retirement plan at work. In this situationReporting on Form 1040A. Report your net benefits (theyou mustuse the special worksheets in Appendix Bamount in box 5 of your Form SSA1099 or Formof Publication 590 to figure both your IRA deductionRRB1099) on line 14a and the taxable part on line 14b. Ifand your taxable benefits.you are married filing separately and you lived apart from

your spouse for all of 2003, also enter D to the right of the 2) Situation (1) does not apply and you take an exclu-word benefits on line 14a. sion for interest from qualified U.S. savings bonds

(Form 8815), for adoption benefits (Form 8839), forBenefits not taxable. If none of your benefits are taxable,foreign earned income or housing (Form 2555 or

do not report any of them on your tax return. But if you are Form 2555EZ), or for income earned in Americanmarried filing separately and you lived apart from yourSamoa (Form 4563) or Puerto Rico by bona fidespouse for all of 2003, make the following entries. On Formresidents. In this situation, you mustuse Worksheet1040, enter D to the right of the word benefits on line1 in this publication to figure your taxable benefits.20a and 0 on line 20b. On Form 1040A, enter D to

the right of the word benefits on line 14a and 0 on 3) You received a lump-sum payment for an earlierline 14b. year. In this situation, also complete Worksheet 2or

3and Worksheet 4in this publication. SeeLump-Sum Election, later.

How Much Is Taxable?ExamplesIf part of your benefits are taxable, how much is taxable

depends on the total amount of your benefits and otherThe following pages contain a few examples you can use

income. Generally, the higher that total amount, the as a guide to figure the taxable part of your benefits.greater the taxable part of your benefits.

Maximum taxable part. Generally, up to 50% of yourbenefits will be taxable. However, up to 85% of your bene-fits can be taxable if either of the following situationsapplies to you.

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Example 1.George White is single and files Form 1040 for 2003. In addition to receiving social security payments, he received a fullytaxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of$28,990. He received a Form SSA1099 in January 2004 that shows his net social security benefits of $5,980 in box 5.To figure his taxable benefits, George completes Worksheet 1, shown below. On line 20a of his Form 1040, Georgeenters his net benefits of $5,980. On line 20b, he enters his taxable benefits of $2,990.

Filled-in Worksheet 1. Figuring Your Taxable Benefits Keep for your records

Before you begin: Is your filing status Married filing separately?No. Go to line 1 below.Yes. Did you live apart from your spouse all year?

No. Go to line 1 below.Yes. Do the following if you file:

Form 1040: Enter D to the right of the word benefits on line 20a, then go to line 1 below.Form 1040A: Enter D to the right of the word benefits on line 14a, then go to line 1 below.

1. Enter the total amount from box 5 of ALL your Forms SSA1099 and RRB1099. . . . . . . . . . . . 1. $5,980Note: If line 1 is zero or less, stop here; none of your benefits are taxable. Otherwise, go to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 2,9903. Enter the total of the amounts from:

Form 1040:Lines 7, 8a, 8b, 9a, 10-13a, 14, 15b, 16b, 17-19, and 21Form 1040A:Lines 7, 8a, 8b, 9a, 10a, 11b, 12b, and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 28,990

4. Form 1040 filers:Enter the total of any exclusions/adjustments for:

Qualified U.S. savings bond interest (Form 8815, line 14)

Adoption benefits (Form 8839, line 30) Foreign earned income or housing (Form 2555, lines 43 and 48, or Form 2555 EZ, line 18), and

Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico

Form 1040A filers:Enter the total of any exclusions for:


Adoption benefits (Form 8839, line 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. -0-5. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 31,9806. Form 1040 filers:Enter the amount from Form 1040, line 33, minus any amounts on Form 1040, lines 25 and 26.

Form 1040A filers:Enter the amount from Form 1040A, line 20, minus any amounts on Form 1040A, lines 18 and19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. -0-

7. Is the amount on line 6 less than the amount on line 5?No. None of your social security benefits are taxable.STOP

Yes. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 31,9808. If you are:

Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your

spouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 25,000Note: If you are married filing separately and you lived with your spouse at any time in 2003, skip lines 8 through 15;multiply line 7 by 85% (.85) and enter the result on line 16. Then go to line 17.

9. Is the amount on line 8 less than the amount on line 7?No. None of your benefits are taxable. Do not enter any amounts on Form 1040, line 20a or 20b, orSTOP

on Form 1040A, line 14a or 14b. But if you are married filing separately and you lived apart fromyour spouse for all of 2003, enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b.

Yes. Subtract line 8 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 6,98010. Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing

separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 9,00011. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. -0-12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 6,98013. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 3,49014. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 2,99015. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. -0-16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 2,99017. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 5,08318. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. $2,990

Enter the amount from line 1 above on Form 1040, line 20a, or on Form 1040A, line 14a.

Enter the amount from line 18 above on Form 1040, line 20b, or on Form 1040A, line 14b.

Note: If you received a lump-sum payment in this year that was for an earlier year, also complete Worksheet 2 or 3and Worksheet 4 to see whether you can report a lower taxable benefit.

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Example 2.Ray and Alice Hopkins file a joint return on Form 1040A for 2003. Ray is retired and received a fully taxable pension of$15,500. He also received social security benefits, and his Form SSA1099 for 2003 shows net benefits of $5,600 in box5. Alice worked during the year and had wages of $14,000. She made a deductible payment to her IRA account of $1,000.Ray and Alice have two savings accounts with a total of $250 in interest income. They complete Worksheet 1 (below) andfind that none of Rays benefits are taxable. They leave lines 14a and 14b of their Form 1040A blank.










Adoption benefits (Form 8839, line 30) Foreign earned income or housing (Form 2555, lines 43 and 48, or Form 2555 EZ, line 18), and





Form 1040A filers:Enter the amount from Form 1040A, line 20, minus any amounts on Form 1040A, lines 18 and19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 1,000



Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your

spouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 32,000Note: If you are married filing separately and you lived with your spouse at any time in 2003, skip lines 8 through 15;multiply line 7 by 85% (.85) and enter the result on line 16. Then go to line 17.



Yes. Subtract line 8 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10. Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing

separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.




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Example 3.Joe and Betty Johnson file a joint return on Form 1040 for 2003. Joe is a retired railroad worker and in 2003 received the socialsecurity equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Joes Form RRB1099 shows $10,000 in box 5.Betty is a retired government worker and received a fully taxable pension of $38,000. They had $2,300 in interest income plusinterest of $200 on a qualified U.S. savings bond. The savings bond interest qualified for the exclusion. Thus, they have a totalincome of $40,300 ($38,000 + $2,300). They figure their taxable benefits by completing Worksheet 1 below. More than 50% ofJoes net benefits are taxable because the income on line 7 of the worksheet ($45,500) is more than $44,000. (See Maximumtaxable partunder How Much Is Taxableearlier.) Joe and Betty enter $10,000 on line 20a, Form 1040, and $6,275 on line 20b,Form 1040.










Adoption benefits (Form 8839, line 30)

Foreign earned income or housing (Form 2555, lines 43 and 48, or Form 2555 EZ, line 18), and




Adoption benefits (Form 8839, line 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 2005. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 45,5006. Form 1040 filers:Enter the amount from Form 1040, line 33, minus any amounts on Form 1040, lines 25 and 26.




Married filing jointly, enter $32,000

Single, head of household, qualifying widow(er), or married filing separately and you lived apart from yourspouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 32,000

Note: If you are married filing separately and you lived with your spouse at any time in 2003, skip lines 8 through 15;multiply line 7 by 85% (.85) and enter the result on line 16. Then go to line 17.




separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 12,00011. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. 1,50012. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 12,00013. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 6,00014. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 5,00015. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 1,27516. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 6,27517. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 8,50018. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. $6,275




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Example 4.Bill and Eileen Jones are married and live together, but file separate Form 1040 returns for 2003. Bill earned $8,000 during2003. The only other income he had for the year was $4,000 net social security benefits (box 5 of his Form SSA1099).Bill figures his taxable benefits by completing Worksheet 1 below. He must include 85% of his social security benefits in histaxable income because he is married filing separately and lived with his spouse during 2003. See How Much Is Taxableearlier.


Before you begin: Is your filing status Married filing separately?No. Go to line 1 below.

Yes. Did you live apart from your spouse all year?No. Go to line 1 below.Yes. Do the following if you file:








Foreign earned income or housing (Form 2555, lines 43 and 48, or Form 2555 EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico








Single, head of household, qualifying widow(er), or married filing separately and you lived apart from yourspouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.





separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.

15. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 8,50017. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 3,40018. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. $3,400




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the completed worksheets to your return. Keep them withyour records.Lump-Sum Election

Once you elect this method of figuring the taxableYou must include the taxable part of a lump-sum (retroac- part of a lump-sum payment, you can revoke yourtive) payment of benefits received in 2003 in your 2003 election only with the consent of the IRS.CAUTION

!income, even if the payment includes benefits for an earlieryear. Lump-sum payment reported on Form SSA1099 or

RRB1099. If you received a lump-sum payment in 2003This type of lump-sum benefit payment shouldthat includes benefits for one or more earlier years afternot be confused with the lump-sum death benefit1983, it will be included in box 3 of either Form SSA1099

that both the SSA and RRB pay to many of their

TIP

or Form RRB1099. That part of any lump-sum paymentbeneficiaries. No part of the lump-sum death benefit isfor years before 1984 is not taxed and will not be shown onsubject to tax.the form. The form will also show the year (or years) theGenerally, you use your 2003 income to figure thepayment is for. However, Form RRB1099 will not show ataxable part of the total benefits received in 2003. How-breakdown by year (or years) of any lump-sum paymentever, you may be able to figure the taxable part of afor years before 2001. You must contact the RRB for alump-sum payment for an earlier year separately, usingbreakdown by year for any amount shown in box 9.your income for the earlier year. You can elect this method

if it lowers your taxable benefits.Under the lump-sum election method, you refigure the Example

taxable part of all your benefits for the earlier year (includ-Jane Jackson is single. In 2002 she applied for socialing the lump-sum payment) using that years income. Thensecurity disability benefits but was told she was ineligible.you subtract any taxable benefits for that year that youShe appealed the decision and won. In 2003, she received

previously reported. The remainder is the taxable part of a lump-sum payment of $6,000, of which $2,000 was forthe lump-sum payment. Add it to the taxable part of your2002 and $4,000 was for 2003. Jane also received $5,000benefits for 2003 (figured without the lump-sum paymentin social security benefits in 2003, so her total benefits infor the earlier year).2003 were $11,000. Janes other income for 2002 and

Since the earlier years taxable benefits are in- 2003 is as follows.cluded in your 2003 income, no adjustment is

Income 2002 2003made to the earlier years return. Do not file anCAUTION!

amended return for the earlier year. Wages $20,000 $ 3,500Interest income 2,000 2,500Dividend income 1,000 1,500Will the lump-sum election method lower your taxableFully taxable pension 18,000benefits? To find out, take the following steps.Total income $23,000 $25,500

1) Complete Worksheet 1 in this publication. To see if the lump-sum election method results in lowertaxable benefits, she completes Worksheets 1, 2, and 4

2) Complete Worksheet 2and Worksheet 3as appro- from this publication. She does not need to completepriate. Use Worksheet 2if your lump-sum paymentWorksheet 3since her lump-sum payment was for yearswas for a year after 1993. Use Worksheet 3if it wasafter 1993.for 1993 or an earlier year. Complete a separate

Jane completes Worksheet 1 to find the amount of herWorksheet 2or Worksheet 3for each earlier year fortaxable benefits for 2003 under the regular method. Shewhich you received the lump-sum payment.completes Worksheet 2 to find the taxable part of the

3) Complete Worksheet 4. lump-sum payment for 2002 under the lump-sum electionmethod. She completes Worksheet 4 to decide if the4) Compare the taxable benefits on line 18 of Work-lump-sum election method will lower her taxable benefits.sheet 1 with the taxable benefits on line 20 of Work-

After completing the worksheets, Jane compares thesheet 4.amounts from line 20 of Worksheet 4and line 18 of Work-

If the taxable benefits on Worksheet 4are lower than the sheet 1. Because the amount on Worksheet 4is smaller,taxable benefits on Worksheet 1, you can elect to report she chooses to use the lump-sum election method. To do

the lower amount on your return. this, she prints LSE to the left of line 20a on Form 1040.She then enters $11,000 on line 20a of Form 1040 and herMaking the election. If you elect to report your taxabletaxable benefits of $2,500 on line 20b.benefits under the lump-sum election method, follow the

Janes filled-in worksheets (1, 2, and 4) follow.instructions at the bottom of Worksheet 4. Do not attach

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Example. Jane Jackson




















Single, head of household, qualifying widow(er), or married filing separately and you lived apart from yourspouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 25,000





separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 9,00011. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. -0-12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 6,00013. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 3,00014. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 3,00015. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. -0-16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 3,00017. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 9,35018. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. $3,000

Enter the amount from line 1 above on Form 1040, line 20a, or on Form 1040A, line 14a. Enter the amount from line 18 above on Form 1040, line 20b, or on Form 1040A, line 14b.


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Filled-in Worksheet 2. Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)

Enter earlier year 2002

Keep for your records

1. Enter the total amount from box 5 of ALL your Forms SSA1099 and RRB 1099 for the earlier year, plus thelump-sum payment for the earlier year received after that year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. $2,000

Note: If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Otherwise, go on to line 2.2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 1,0003. Enter the adjusted gross income reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 23,0004. Enter the total of any exclusions/adjustments you claimed in the earlier year for:

Adoption benefits (Form 8839)

Qualified U.S. savings bond interest (Form 8815)

Student loan interest (Form 1040, line 24 (line 25 in 2002), or Form 1040A, line 16 (line 17 in 2000, 2001, andline 18 in 2002))

Tuition and fees (Form 1040, line 26, or Form 1040A, line 19)

Foreign earned income or housing (Form 2555 or Form 2555EZ)

Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico . . . . . . . . . . . . . . . . . 4. -0-5. Enter any tax-exempt interest received in the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. -0-6. Add lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 24,0007. Enter taxable benefits reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. -0-8. Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 24,000

9. Enter $25,000 ($32,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier yearand you lived with your spouse at any time during the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 25,000

10. Subtract line 9 from line 8. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. -0-Note: If line 10 is zero or less, skip lines 11 through 20 and enter -0- on line 21. Otherwise, go on to line 11.

11. Enter $9,000 ($12,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier yearand you lived with your spouse at any time during the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Subtract line 11 from line 10. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter the smaller of line 10 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter one-half of line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Enter the smaller of line 2 or line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.19. Refigured taxable benefits. Enter the smaller of line 17 or line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.20. Enter taxable benefits reported on your return for the earlier year (or as refigured due to a previous lump-sum

payment for the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.21. Additional taxable benefits. Subtract line 20 from line 19. Also enter this amount on line 19 of Worksheet 4 . . . . . 21. -0-

Note: Do not file an amended return for this earlier year. Complete a separate Worksheet 2 or Worksheet 3 foreach earlier year for which you received a lump-sum payment in 2003.

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Filled-in Worksheet 4. Figure Your Taxable Benefits Under the Lump-Sum Election Method(Use With Worksheet 2 or 3)


Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet.

1. Enter the total amount from box 5 of ALL your Forms SSA 1099 and RRB 1099 for 2003, minus the lump-sumpayment for years before 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. $9,000Note: If line 1 is zero or less, enter zero on lines 2 and 11 and skip lines 3 through 10. Otherwise, go on to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. 4,5003. Enter the amount from line 3 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 25,5004. Enter the amount from line 4 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. -0-5. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 30,0006. Enter the amount from line 6 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. -0-7. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 30,0008. Enter the amount from line 8 of Worksheet 1. (Enter -0- if you are married filing separately and lived with your

spouse at any time during 2003.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 25,0009. Subtract line 8 from line 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 5,000

Note: If line 9 is zero or less, skip lines 10 through 17 and enter -0- on line 18. Otherwise, go on to line 10.10. Enter the amount from line 10 of Worksheet 1. (Enter -0- if you are married filing separately and lived with your

spouse at any time during 2003.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 9,000

11. Subtract line 10 from line 9. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. -0-12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 5,00013. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 2,50014. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. 2,50015. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. -0-16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. 2,50017. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17. 7,65018. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. 2,50019. Enter the total of the amounts from line 21 of Worksheet 2 and line 14 of Worksheet 3 for all earlier years for which

the lump-sum payment was received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. -0-20. Taxable benefits under lump-sum election method. Add lines 18 and 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. $2,500

Note: If line 20 above is not smaller than line 18 of Worksheet 1, you cannot use this method to figure your taxablebenefits. Instead, follow the instructions on Worksheet 1 to report your benefits.

You can elect to report your taxable benefits under this method if line 20 above is smaller than line 18 of Worksheet 1. To elect this

method: Make the following entries on your return:

On Form 1040, enter LSE to the left of line 20a.On Form 1040A, enter LSE to the left of line 14a.

Enter the amount from line 1 of Worksheet 1 on Form 1040, line 20a, or on Form 1040A, line 14a. If you are married filing separatelyand you lived apart from your spouse for all of 2003, also make the entries described at the top of Worksheet 1.

If line 20 above is zero, follow the instructions in line 9 for No on Worksheet 1. Otherwise, enter the amount from line 20 above onForm 1040, line 20b, or on 1040A, line 14b.

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Example. John and Mary file a joint return for 2003.John received Form SSA1099 showing $3,000 in box 5.Deductions Related to YourMary also received Form SSA1099 and the amount in

Benefits box 5 was ($500). John and Mary will use $2,500 ($3,000minus $500) as the amount of their net benefits when

You may be entitled to deduct certain amounts related to figuring if any of their combined benefits are taxable.the benefits you receive.

Repayment of benefits received in an earlier year. IfDisability payments. You may have received disability the total amount shown in box 5 of all of your Formspayments from your employer or an insurance company SSA1099 and RRB1099 is a negative figure, you canthat you included as income on your tax return in an earlier

take an itemized deduction for the part of this negativeyear. If you received a lump-sum payment from SSA or figure that represents benefits you included in gross in-RRB, and you had to repay the employer or insurance come in an earlier year.company for the disability payments, you can take an If this deduction is $3,000 or less, it is subject to theitemized deduction for the part of the payments you in- 2%-of-adjusted-gross-income limit that applies to certaincluded in gross income in the earlier year. If the amount miscellaneous itemized deductions. Claim it on line 22,you repay is more than $3,000, you may be able to claim a Schedule A (Form 1040).tax credit instead. Claim the deduction or credit in the

If this deduction is more than $3,000, you shouldsame way explained under Repayment of benefits re-figure your tax two ways:ceived in an earlier yearin the section Repayments More

Than Gross Benefits, later. 1) Figure your tax for 2003 with the itemized deductionincluded on line 27 of Schedule A.Legal expenses. You can usually deduct legal expenses

that you pay or incur to produce or collect taxable income 2) Figure your tax for 2003 in the following steps:

or in connection with the determination, collection, or re-fund of any tax. a) Figure the tax without the itemized deduction in-Legal expenses for collecting the taxablepart of your cluded on line 27 of Schedule A.

benefits are deductible as a miscellaneous itemized de-b) For each year after 1983 for which part of the

duction on line 22, Schedule A (Form 1040).negative figure represents a repayment of bene-fits, refigure your taxable benefits as if your total

Repayments More Than Gross benefits for the year were reduced by that part ofthe negative figure. Then refigure the tax for thatBenefitsyear.

In some situations, your Form SSA1099 or Formc) Subtract the total of the refigured tax amounts inRRB1099 will show that the total benefits you repaid (box

(b) from the total of your actual tax amounts.4) are more than the gross benefits (box 3) you received. Ifthis occurred, your net benefits in box 5 will be a negative d) Subtract the result in (c) from the result in (a).

figure (a figure in parentheses) and none of your benefitswill be taxable. If you receive more than one form, a Compare the tax figured in methods (1) and (2). Yournegative figure in box 5 of one form is used to offset a tax for 2003 is the smaller of the two amounts. If method (1)positive figure in box 5 of another form for that same year. results in less tax, take the itemized deduction on line 27,

If you have any questions about this negative figure, Schedule A (Form 1040). If method (2) results in less tax,contact your local SSA office or your local RRB field office. claim a credit for the amount from step 2(c) above on line

67 of Form 1040 and write I.R.C. 1341 in the margin toJoint return. If you and your spouse file a joint return, andthe left of line 67. If both methods produce the same tax,your Form SSA1099 or RRB 1099 has a negative figurededuct the repayment on line 27, Schedule A (Form 1040).in box 5, but your spouses does not, subtract the amount

in box 5 of your form from the amount in box 5 of yourspouses form. You do this to get your net benefits whenfiguring if your combined benefits are taxable.

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Worksheet 1. Figuring Your Taxable Benefits Keep for your records




1. Enter the total amount from box 5 of ALL your Forms SSA1099 and RRB1099. . . . . . . . . . . . 1.Note: If line 1 is zero or less, stop here; none of your benefits are taxable. Otherwise, go to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Enter the total of the amounts from:

Form 1040:Lines 7, 8a, 8b, 9a, 10-13a, 14, 15b, 16b, 17-19, and 21Form 1040A:Lines 7, 8a, 8b, 9a, 10a, 11b, 12b, and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.








Adoption benefits (Form 8839, line 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Form 1040 filers:Enter the amount from Form 1040, line 33, minus any amounts on Form 1040, lines 25 and 26.

Form 1040A filers:Enter the amount from Form 1040A, line 20, minus any amounts on Form 1040A, lines 18 and19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.


Yes. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. If you are:


Single, head of household, qualifying widow(er), or married filing separately and you lived apart from yourspouse for all of 2003, enter $25,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.





separately and you lived apart from your spouse for all of 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11. Subtract line 10 from line 9. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Taxable benefits. Enter the smaller of line 16 or line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.

Enter the amount from line 1 above on Form 1040, line 20a, or on Form 1040A, line 14a. Enter the amount from line 18 above on Form 1040, line 20b, or on Form 1040A, line 14b.


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Worksheet 2. Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)

Enter earlier year


1. Enter the total amount from box 5 of ALL your Forms SSA1099 and RRB 1099 for the earlier year, plus thelump-sum payment for the earlier year received after that year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.Note: If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Otherwise, go on to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Enter the adjusted gross income reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Enter the total of any exclusions/adjustments you claimed in the earlier year for:

Adoption benefits (Form 8839)


Student loan interest (Form 1040, line 24 (line 25 in 2002), or Form 1040A, line 16 (line 17 in 2000, 2001, andline 18 in 2002))

Tuition and fees (Form 1040, line 26, or Form 1040A, line 19)


Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico . . . . . . . . . . . . . . . . . 4.5. Enter any tax-exempt interest received in the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Add lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7. Enter taxable benefits reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9. Enter $25,000 ($32,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier year

and you lived with your spouse at any time during the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10. Subtract line 9 from line 8. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.Note: If line 10 is zero or less, skip lines 11 through 20 and enter -0- on line 21. Otherwise, go on to line 11.

11. Enter $9,000 ($12,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier yearand you lived with your spouse at any time during the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Subtract line 11 from line 10. If zero or less, enter -0-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter the smaller of line 10 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter one-half of line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Enter the smaller of line 2 or line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Multiply line 1 by 85% (.85) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.19. Refigured taxable benefits. Enter the smaller of line 17 or line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.20. Enter taxable benefits reported on your return for the earlier year (or as refigured due to a previous lump-sum

payment for the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.

21. Additional taxable benefits. Subtract line 20 from line 19. Also enter this amount on line 19 of Worksheet 4 . . . . 21.


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Worksheet 3. Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994)

Enter earlier year


1. Enter the total amount from box 5 of ALL your Forms SSA1099 and RRB 1099 for the earlier year, plus thelump-sum payment for the earlier year received after that year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.Note: If line 1 is zero or less, skip lines 2 through 13 and enter -0- on line 14. Otherwise, go on to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Enter the adjusted gross income reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Enter the total of any exclusions/adjustments you claimed in the earlier year for:



Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico . . . . . . . . . . . . . . . . . 4.5. Enter any tax-exempt interest received in the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Add lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7. Enter taxable benefits reported on your return for the earlier year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9. Enter $25,000 ($32,000 if married filing jointly for the earlier year; $0 if married filing separately for the earlier year

and you lived with your spouse at any time during the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10. Subtract line 9 from line 8. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

Note: If line 10 is zero or less, skip lines 11 through 13 and enter -0- on line 14. Otherwise, go on to line 11.11. Enter one-half of line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Refigured taxable benefits. Enter the smaller of line 2 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter taxable benefits reported on your return for the earlier year (or as refigured due to a previous lump-sumpayment for the year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.

14. Additional taxable benefits. Subtract line 13 from line 12. Also enter this amount on line 19 of Worksheet 4 . . . . 14.


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Worksheet 4. Figure Your Taxable Benefits Under the Lump-Sum Election Method(Use With Worksheet 2 or 3)


Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet.

1. Enter the total amount from box 5 of ALL your Forms SSA 1099 and RRB 1099 for 2003, minus the lump-sumpayment for years before 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.Note: If line 1 is zero or less, enter zero on lines 2 and 11 and skip lines 3 through 10. Otherwise, go on to line 2.

2. Enter one-half of line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Enter the amount from line 3 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Enter the amount from line 4 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Enter the amount from line 6 of Worksheet 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7. Subtract line 6 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. Enter the amount from line 8 of Worksheet 1. (Enter -0- if you are married filing separately and lived with your

spouse at any time during 2003.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9. Subtract line 8 from line 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.

Note: If line 9 is zero or less, skip lines 10 through 17 and enter -0- on line 18. Otherwise, go on to line 10.10. Enter the amount from line 10 of Worksheet 1. (Enter -0- if you are married filing separately and lived with your

spouse at any time during 2003.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11. Subtract line 10 from line 9. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12. Enter the smaller of line 9 or line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter one-half of line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.

14. Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Multiply line 11 by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Multiply line 1 by 85% (.85) .

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