Retirees affected by the Windfall Elimination Provision and Government Pension Offset may receive unexpected Social Security deposits after Congress repealed both provisions retroactive to January 2024. SSA is paying the difference between amounts previously received and amounts owed under the new rules. Examples include deposits around $30,000 to over $50,000, with some retirees seeing revised benefit statements and much higher monthly amounts going forward. The lump sum is treated as Social Security income in the year received, which can raise federal tax brackets, increase the taxable portion of benefits, and affect Medicare Part B and Part D premiums through IRMAA. It can also reduce Affordable Care Act subsidies for a spouse under 65. Internal Revenue Code Section 86(e) provides a lump-sum election to attribute portions of the back payment to the years owed and recompute taxable amounts.
"The fix is buried in Internal Revenue Code Section 86(e), often called the lump-sum election. Instead of taxing the entire back payment in the year of receipt, a retiree can attribute portions of it to the years the payments were owed, recompute the taxable share of benefits using each prior y"
#social-security #wep-and-gpo #taxation-of-social-security-benefits #medicare-irmaa #retirement-benefits
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