>>It looks like IRS only Taxed 85% however INS took 100%.<<
In spite of what I said before about 1040X during an audit ["IRS CP2000 Problem"], you might need one this time because you have new issues.of the deduction/credit for the repayment and lump sum treatment of the SS. (See Pubs 525 and 915 for details.)
But CALL first! Be sure to have POA ready to fax (or client present). Also, have ALL the source documents, worksheets, and draft forms completed in hand before you call. That means redoing all federal returns back to 2009, a state amendment for 2011, and a written request for penalty abatement describing the reasonable cause. You should be able to resolve the matter with that single phone call and one followup fax or mailing (plus mailing the state amended return),
As always, I highly recommend an engagement letter so there is no misunderstanding. You can not guarantee any specific results from the audit, and the client is responsible for all taxes, interest and penalty. However, I don't think you should charge a fee if you knew or should have known that the client received Social Security benefits.