Spouse died 2012 w-2 in 2012

[bekzm]

Have a client wife dies December 31, 2011 and received her vacation pay in her name for 2012. She has federal withholding. They also had a 14 year child so I know that he can take the Qualifying Widow but the W-2. I have included in with his wages and put the T on it but not 100% sure if that is correct to include her W-2 when not filing a joint return. Any input on who claims the W-2 wages - he or will she file a separate one as what....

[Gene V]

Income in Respect of a Decedent

See Pub. 559 page 9 for information on Income in Respect of a Decedent
on page 10 see Wages

[Roland Slugg]

This reply was edited for content on 3/6/2013

The wife's employer may have issued a W-2 or a form 1099-MISC to report those final wages and/or vacation pay. In either case, that 2012 income should be reported on an estate income tax return, F-1041 ... "Estate of [Deceased Wife]." The gross amount should go on line 8 (F-1041), and if there was any FWHT, it should be reported on line 24e (F-1041). If there was FWHT, attach form W-2 or 1099-MISC to the front of F-1041. Presumably, the K-1 will be issued to the widower, so the income will end up on his return anyway.

A little off topic, but I seem to recall that wages paid after the year of death are not subject to to FICA ... maybe not Medicare tax either. If my recollection is correct, and a 2012 W-2 does indicate FICA and Medicare were withheld, you might suggest to your client to request a refund from his late wife's employer.

[Burke]

Wages after the year of death should have been reported on a 1099MISC. See instructions for W-2's, 1099's. The check should have been made payable to the Estate or to the surviving spouse. You cannot file a tax return for the deceased after the year of death, and are not likely to get a refund of her withholding or FICA on the husband's return either. He can try to get it back from the employer, but he should have done that in 2012.

[bekzm]

TRhanks BUT

Thanks for the input but if not wages earned - it was her vacation. Yes they withheld taxes, state, social security and medicare but they an area community action partnership that helps people that are in the poverty stage. So with this in mind - think it might be a problem having them change the W-2 - thinking they are assuming they are NOT wrong. So will have to file it sounds like the 1041 for the husband to receive and report her income. Wow don't want messes. Family been through a lot and now this.

[Burke]

The vacation pay is treated as wages and was reported on the employer's 941 for the first quarter of 2012.
The employer can file a 941-X for the quarter in which they incorrectly withheld FICA taxes and get a refund in order to reimburse the representative of the deceased spouse. The income taxes were withheld under the employee's SSN and that's where they are sitting. It is not likely you will be able to get a refund via a 1041 which has to be filed with an estate EIN. They may be assuming they are not wrong, but you can show them the IRS instructions in writing to prove that they are.