How do state tax rules (e.g., Connecticut) treat federal Publication 915 lump‑sum election results for state income tax adjustments?
Executive summary
Connecticut generally conforms to the federal Publication 915 lump‑sum election mechanics by requiring taxpayers to carry the federal worksheet results into the state Social Security Benefit Adjustment Worksheet—specifically instructing use of Line 20 from federal Worksheet 4 when the lump‑sum election is used [1] [2]. The federal rule itself lets a taxpayer refigure prior‑year taxable benefits and treats the remainder as the taxable part of the lump sum, and Connecticut tells filers to import those federal worksheet amounts when computing the state adjustment [2] [1].
1. How the federal lump‑sum election works and why states care
Under the lump‑sum election method the IRS lets a taxpayer refigure the taxable portion of benefits for the earlier year (including the lump‑sum payment) using that earlier year’s income, then subtract any taxable benefits previously reported so the remainder becomes the taxable portion of the lump sum in the year received; taxpayers indicate the election on Form 1040/SR (check box on line 6c) and compute the result using Worksheets 1, 2/3 and Worksheet 4 in Publication 915 [2] [3]. States care because federal taxable Social Security affects federal AGI and line items that many states use as the starting point for state taxable income; a federal reallocation of taxable benefits therefore changes the dollars Connecticut (and other conforming states) must adjust on the state return [2].
2. Connecticut’s explicit instruction: import the federal worksheet result
Connecticut’s Department of Revenue Services explicitly tells taxpayers using the lump‑sum election method to use Line 20 from federal Worksheet 4 when completing the Connecticut Social Security Benefit Adjustment Worksheet, and it directs taxpayers who cannot use the lump‑sum election to use Worksheet 1 instead—meaning Connecticut looks to the precise federal worksheet lines rather than asking for a separate state calculation [1]. That guidance is the clearest evidence that Connecticut’s state adjustment tracks the federal Publication 915 computation: the state expects the federally derived taxable‑benefit numbers to populate the Connecticut worksheet [1].
3. Practical effects, software and error risks
In practice this means a taxpayer who makes the lump‑sum election and arrives at a lower taxable benefit on federal Worksheet 4 will normally see that lower figure flow into Connecticut’s Social Security adjustment, reducing Connecticut taxable income to the extent the state’s adjustment applies [1] [2]. Tax preparation software supports Publication 915 worksheets and prints LSE indicators only when the election is beneficial, but there are documented cases where software misapplies or ignores IRS worksheet math—prompting taxpayers to double‑check Worksheet 1/2/4 calculations against Publication 915 and Connecticut instructions [4] [5] [6]. That practical mismatch highlights a hidden tension: states streamline compliance by deferring to federal worksheet lines, but taxpayers remain exposed to upstream federal calculation or software errors.
4. Limits of the record and implications for other states
The sources establish Connecticut’s approach clearly—use the federal Publication 915 worksheet lines [1]—and the federal Publication 915 explains the mechanics taxpayers must follow [2]. What the available reporting does not fully document is how every other state treats the lump‑sum election; states vary in conformity to federal AGI and in their own Social Security adjustments, so the Connecticut model is instructive but not universally dispositive [1] [7]. Taxpayers should therefore rely on federal Publication 915 to compute the lump‑sum result and then follow their state’s published worksheets or agency guidance—Connecticut’s DRS explicitly requires importing federal Worksheet 4 Line 20 for filers electing the lump‑sum method [2] [1].