is there a worksheet to determine the best way to treat a long term disability repayment as a lump sum covering multiple years?

[Sue928]

A client received a lump sum payment of >$30000 from SSDI retroactive to 2022. The long term disability insurance company demanded payment of past disability payments. I understand that there are two ways to approach the best tax treatment. 1- include the amount as a miscellaneous deduction on the current year's tax return subject to 2%. (It still gives this instruction in the IRS pubs yet miscellaneous deductions subject to 2% no longer exists.) 2- calculate the tax due with and without the payment attributable for that year (2022) and take the difference as a tax credit on the 2023 return, Schedule 3, line 13b. Is there a worksheet that helps determine what that tax credit should be? Do you have to attach a pdf showing your calculations for the credit taken in 2023?

[Just-Lisa-Now-]

No, I didnt find a worksheet for this anywhere when I had to do it a few years ago.

I opened the prior year return, used Save As and  made a copy, then looked at the tax liability with the income, then took the income away and looked at the tax liability without it and used the difference between the 2 figures for the credit.

[Sue928]

I assume that you take out the LTD ins payments and replace them with the SSDI attributable for that year. Some of the SSDI may not be taxable depending on the other income in the return whereas all of the LTD payments were fully taxable. Am I thinking correctly?