Lump-sum benefits are treated the same as monthly benefits. Thus, if your income is low enough, no benefits are includible in gross income. Otherwise, the benefits may be includible in gross income to the extent of 50% or 85% of the amount received.
Even though the lump-sum benefits may relate to prior years, you take them into account in the year in which they are received as reported to you on Form SSA-1099. However, there are two ways to figure the amount that’s currently includible in gross income: