Inclusion of Decedent Income

[Snaggletooth]

To what extent can a deceased taxpayer include in income on final return for unpaid revenues? (So as to avoid IRD or Estate Revenue)

1) Vacation Pay paid AFTER the date of death and included on W-2.
2) Final Retirement paycheck as a part of regular and monthly retirement benefits. i.e. not in a pension plan.
3) Rental or Business Income paid AFTER date of death, but the date of death is in the normal course of business
which generated the rent/sales.

[Roland Slugg]

A decedent's tax year ends on his DOD, so all income received after that date belongs to another taxpayer (assuming the decedent was a cash basis taxpayer, of course). That "other" taxpayer may be his estate, a trust or a POD beneficiary.

One exception to the above, sort of, is that in the case of a married couple filing jointly, any of the decedent's income that goes to his spouse in the year of death will end up on a joint return anyway.

[Snaggletooth]

I was afraid of that

From what I understand, that is true Sluggo. Logistically, it can be a nightmare, however. Two of the three situations on the OP will
include his SS# on information statements at the end of the year, and the third is a possibility.

For example, I've never seen "Wages" reported as income on an estate tax return, although business income/rent is reportable
without a doubt. I would think there would be a clear demarcation if taxpayer is on the cash basis.

Thanks for responding.

[Roland Slugg]

I've never seen "Wages" reported as income on an estate tax return.

I trust you meant estate income tax return. I've seen it a few times, and even put it there myself once or twice. It goes on the "Other Income" line of F-1041 ... line 7 or 8, I believe. It isn't very common, though, because most decedents are elderly and retired with no W-2 income.

The reason many squealer forms are issued reporting income under the decedent's SSN is because nobody remembers to ask the various payers to use a new payee name and TIN. When that is done soon after the DOD, the 1099s will usually be correct ... or at least pretty close. I don't usually concern myself if the changeover date is off a little and the shift in income is small. Sometimes, however, it's necessary to prepare a reconciliation and attach it to the decedent's final return and to the F-1041. If you'd like to see a sample, send me a PM.

[Burke]

From what I understand, that is true Sluggo. Logistically, it can be a nightmare, however. Two of the three situations on the OP will include his SS# on information statements at the end of the year, and the third is a possibility.

For example, I've never seen "Wages" reported as income on an estate tax return, although business income/rent is reportable
without a doubt. I would think there would be a clear demarcation if taxpayer is on the cash basis.

The proper way to report wages, severance pay, vacation pay, etc are found in the Instructions for Completing W-2's and 1099MISC Forms, and may also be covered in the Pub Information for Survivors, Estates, etc. Sometimes it is split between the final return and the estate income tax return. Especially if it is in two calendar years. SS/MC may also be affected.