1099Misc Taxable after death

[SFBOB]

The money received by the spouse of the deceased was Awards,Vacation and taxable sick pay. I would like to report the $15,000 on Line 21 not subject to FICA. Deceased taxpayer received a W/2 for 6 months in 2010 prior to his death. The 1099Misc is reported to the spouce under her S/S number. Have any of you folks had the same problem in the past. Thanks Bob

[SFBOB]

I will let IRS challange me on 1099Misc

To bump this back up for an opinion? I am going to use Line 21 and file the return Thursday if no other thoughts come in. Have a good Sunday afternoon and stay cool if you are in the Midwest, my old home town was Chicago.

[Lion]

Ttb 21-8

TTB states, "The character of IRD is the same in the hands of the recipient as it would have been to the decedent if paid before death. IRD is taxable to the extent it would have been taxable to the decedent. (IRC 691)" However, it goes on to say, "Wages paid after death are subject to FICA..." It sounds like the employer is responsible for FICA, FUTA, and Medicare tax, and would report them on the W-2 even though the corresponding wages are not in Box 1 but on Form 1099 to the spouse.

I find this very confusing! Read 21-8 and the references TTB cites.

[SFBOB]

Lion Thanks A Bunch

After your post I checked the details on the W/2 that covered the first 6 months wages in 2010 prior to death 6/27/2010. This is the breakdown.
Box [3] S/S Wages 47,516.02
Box [12] Code D 1,400
Box [1] 30,984.99
Take Box [3] less Box [12] and less Box [1] and guess what??? the difference is 15,131.03 the exact amount of the 1099 Misc issued to the spouse after husbands death.
Lion, thanks to your reseach you have provided good information for all members of the TAX BOOK DISCUSSION FORUM. How would we live without it. Have a good Sunday. Thanks Bob

[Lion]

Wow!

Wow, I'm really impressed that the employer did it correctly. These less common situations are one of the reasons I tell my small employers to use a payroll company.

[okie1tax]

1099misc

SFBOB, Hope you don't take this wrong, but AFTER you show the 1099MISC on Line 21, back it out with the explanation that it was incorrectly issued as the income was properly shown on the W2.

[Gary2]

SFBOB, Hope you don't take this wrong, but AFTER you show the 1099MISC on Line 21, back it out with the explanation that it was incorrectly issued as the income was properly shown on the W2.

I disagree. Check the instructions for Form W-2, under "Deceased employee’s wages" on page 4. As Lion said, the W-2 appears to be correct, because when payment is paid after death but in the same year, the additional payment is shown only in boxes 3 and 5 of the W-2 for FICA, but the income is taxed to the estate or beneficiary on the 1099-MISC. The payment wasn't shown in box 1 of the W-2, but does need to be shown somewhere.

[okie1tax]

1099

Gary2, you're right. I looked at the message showing the amounts and box 3 was first then box 1 and I transposed them.

[SFBOB]

Agreed confusing reporting

Yes the income must be reported. The W/2 deducted the FICA from the employee and most likly the employer did the match.Correct total was reported on Box 5 Thanks to Lion, I was able to reconcile. The $15,131.02 needs to be reported on line 21 or Line 7. My choice is line 21. The key is that Box 1 of the W/2 reported $15,131.02 less than the totals from Box 3 and 4. Thanks again to Lion and the excellent reference material from The Tax Book.Have a good evening everyone.

[JohnH]

Very good dicussion - one worth saving for that rare situation. And nice piece of detective work as well.

[Burke]

I disagree. Check the instructions for Form W-2, under "Deceased employee’s wages" on page 4. As Lion said, the W-2 appears to be correct, because when payment is paid after death but in the same year, the additional payment is shown only in boxes 3 and 5 of the W-2 for FICA, but the income is taxed to the estate or beneficiary on the 1099-MISC. The payment wasn't shown in box 1 of the W-2, but does need to be shown somewhere.

This is the correct procedure. If the payment had been made in the following tax year, it would NOT have been included in the W-2, or subject to FICA, but would still have been made on 1099MISC to the estate or bene, whomever it was made payable to. See instructions for 1099MISC, page MISC-2, "Deceased employee's wages" which is quite clear. The 1099MISC should have showed the amounts in Box 3, Other Income. Hopefully, this was done, as Box 7 would be a problem. I would definitely report on Line 21, otherwise they will be looking for a W-2 with Box 1 entry to match.

[Gary2]

I would definitely report on Line 21, otherwise they will be looking for a W-2 with Box 1 entry to match.

Ditto for reporting it on line 21.

The instructions for Form 1040, and in particular the table of "Where to report" starting on page 10 of those instructions (for tax year 2010), is a valuable, oft overlooked resource. Under 1099-MISC, box 3, it says simply to use line 21 (with a footnote about possibly reporting on C, E, F, or 4835 in unusual cases, but nothing about ever reporting it on line 7).

I often rely on the IRS online pubs when I don't have my hardcopy TTB handy.

[SFBOB]

Thanks Gary

I appreciate the confirmation of Line 21