Jennevieve Marie Fletcher, 2021 T. C. Sum. Op. 9, filed 5/10/21, did the right thing. When she started her home-based business, she’d been receiving SSDI. So she told SSA, who took their time but agreed.  SSA let Jennevieve pay back the excess at $100 per month. Jennevieve paid, but it was after the year she had received the overpayment but hadn’t reported it on her 1040.

Section 86(d)(2)(A) lets those who pay back Social Security benefits received for a prior year deduct repayments in the current year, but that doesn’t help Jennevieve.

STJ Daniel A (“Yuda”) Guy has the story.

“Petitioner contends that the Social Security benefits that she received in [year at issue] should be excluded from her gross income because she is obliged to repay those benefits to the SSA. As petitioner sees it, the Social Security benefits that she received in [year at issue] are tantamount to a nontaxable bank loan or cash advance.” 2021 T. C. Sum. Op. 9, at p. 4.

Except it isn’t.

“Although we understand why petitioner might view the excess Social Security benefits as a loan or advance, the Code provides otherwise. Petitioner does not dispute that she received Social Security benefits in [year at issue] and, consequently, she must include those payments as income for that year to the extent provided in section 86. Petitioner’s repayment in [future year] of Social Security benefits received in [year at issue] does not affect her [year at issue] tax liability. Inasmuch as respondent properly computed petitioner’s income tax deficiency in accordance with section 86, the deficiency must be sustained, and we so hold.” 2021 T. C. Sum. Op. 9, at p. 4. (Footnote omitted, but it says that while Section 86(d)(2) might help Jennevieve, STJ Yuda isn’t going there).

Jennevieve did the right thing.