Estate w/ only one 1099R

[Jesse]

I have a friend of my fathers, not a client who's son died. He had a disability policy that paid a death benefit of just over $5,000. I tried to go through the forms and I come up with just under $900 due to the Federal and $250 to Wisconsin.

Is there any suggestions to knock this down? If it was distributed, but was not required to be distributed can it still flow through the K-1 and taxed to the beneficiary(father) at his tax rate?

This might be a mute point because I haven't a clue what the Dad's tax rate is, but I don't even want to suggest it if it's just flat out wrong. This would be the one and only item in the estate and also the only reason Dad was required to get the FEIN, which he also did on his own. He just brought this in on Friday and I'm really having a problem deciphering my left from my right - brain is mush! Seems like this should be simple and straight forward but sometimes that's when it's not!

Even if he files and extension and takes this elsewhere, I would still like to let him know if he needs to pay something with the extension and not make more work for someone to get the estimated payment refunded.

[Burke]

Was the 1099R made out to the estate with the FEIN? There was no named beneficiary on the policy? If so, and it was distributed to the father, then it flows thru to the father on his K-1 and he pays tax on it. Although I am a little dubious as to why a death benefit is taxable. Does it show $$$ in taxable amt? What code? Would it come under the $5,000 rule?

[Jesse]

Goodness, see one little form creates so many problems.

It was reported on a 1099-MISC, box 3 other income, check was issued in the name of the estate with the estate's FEIN.

No explanation, Father says it was a death benefit. If it is easy enough to answer, how do you account for the $5,000 death benefit? Or should he have not received any information reporting form? If too complicated I understand.


Why today, why today, it is a friend of my father's and I'm trying to maintain, but too much going on I'm losing patience and can't tell you how much I appreciate your responses!

[Davc]

If it is easy enough to answer, how do you account for the $5,000 death benefit? Or should he have not received any information reporting form? If too complicated I understand.

The 5K death benefit exclusion no longer exists. For several years now.

[Burke]

Goodness, see one little form creates so many problems.
It was reported on a 1099-MISC, box 3 other income, check was issued in the name of the estate with the estate's FEIN. No explanation, Father says it was a death benefit. If it is easy enough to answer, how do you account for the $5,000 death benefit? Or should he have not received any information reporting form? If too complicated I understand.
going on I'm losing patience and can't tell you how much I appreciate your responses!

I have no idea why an insurance company would issue a 1099MISC / Other income / Box 3, on a "death benefit." Does not sound right. Something is amiss.

[S T]

Aren't Benefits

I have re-reda this post several times, and then a thought finally occurred, sorry my brain is "mush" about now.

If disability benefits are paid, wouldn't they only be taxable if the employer paid for the benefits as a fringe benefit. If the deceased paid for the benefits they would be non-taxable.

Then the death component, seems like it would follow the same rules, if employer paid for the benefit, taxable, however, if the deceased paid for the benefit, then non-taxable, much the same as a life insurance policy payout.

As Burke indicated, Something just doesn't seem right, as to why the insurance company would issue on a 1099 MISC, should be a 1099R ----Who issued the 1099 Misc form?

[Jesse]

The 1099R is a Mis-title-brain tuckered out.

Father took care of everything:
Son had cancer for several years and received disability benefits taxable as the employer did pay for the benefits as a fringe benefit, UNUM Life Insurance Company issued a W-2 for each of the these three years.

In final year a W-2 was issued for the pre-death payments to the son. UNUM then made a final payment, but would only pay to the estate. Dad filed SS-4 and created the estate, received a check to the estate, and now has a 1099MISC issued in the estate name and FEIN number.

He paid remaining medical costs and remainder went towards funeral.

So I think it would be taxable as the employer sponsored benefit, but estate tax seems high, but if that's what it is so be it.