Residual insurance payments to deceased insurance agent .

[taxitc]

Should this be exempt from social security tax?

[BOB W]

If he was alive it would go on a schedule C.

[taxitc]

He died over 4 years ago.

[taxitc]

the 1099 was made out to his wife. Died over 4 year go.

[BOB W]

Let her claim it income subject to SS. Is it a 1099NEC? If not, straight income no SS.

[ATSMAN]

When I was in my mid 20s a neighbor was a Life Insurance agent with MetLife. After he died his wife got his residual commissions for a while. I don't recall any 1099-Misc or W2 at that time just a check for a few thousand dollars made to her. If I recall I just put that as other income. I do remember speaking with the manager of the office and she told me that the old agent's contract had a clause that as long as the policy was in effect she would continue to get those residual commissions.

If you think about it it can't be self employed income because she was not self employed. It can't be W2 income either because her husband was dead. It could have been income to the estate but then it should have been paid as such.

In this case how much money are we talking about? Generally those residual commissions checks are less than $600 for the year that I seem to recall.

[Burke]

Commissions paid to a retired insurance salesperson that are reported on 1099NEC (formerly MISC) are subject to self-employment taxes. See exception outlined on pages 25 and 26 of PUB 334 if certain conditions are met. Also, such payments to a surviving spouse are NOT treated as subject to self-employment tax and are not reported on Sche C.

[taxitc]

If he was alive it would go on a schedule C.

He died over 4 yrs. ago. Wife never had any involvement in his insurance business. Tax book 5-3 has
comment on self employed insurance agents. It is on a 1099-NEC Nonemployee compensation, (Her SS#) ??

[taxitc]

Commissions paid to a retired insurance salesperson that are reported on 1099NEC (formerly MISC) are subject to self-employment taxes. See exception outlined on pages 25 and 26 of PUB 334 if certain conditions are met. Also, such payments to a surviving spouse are NOT treated as subject to self-employment tax and are not reported on Sche C.

Thanks I will check out. Maybe they didn't know what form to use?

[Burke]

Thanks I will check out. Maybe they didn't know what form to use?

Very common. It was often reported incorrectly on 1099MISC as well. Report as other income for spouse, no SE. They obviously knew he died as they had her SSN. She can contact them to correct if you wish, as it will continue unless it is changed on their end.

[Anarchrist]

Definitely not SE.

§1402(k)

https://www.law.cornell.edu/uscode/text/26/1402

She not being an insurance agent also makes it not SE income.

[taxitc]

Thanks I will check out. Maybe they didn't know what form to use?

Pub 334 page 26 "Renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C. Thanks again Everyone Plus tip on Tax Book.

[taxitc]

When I was in my mid 20s a neighbor was a Life Insurance agent with MetLife. After he died his wife got his residual commissions for a while. I don't recall any 1099-Misc or W2 at that time just a check for a few thousand dollars made to her. If I recall I just put that as other income. I do remember speaking with the manager of the office and she told me that the old agent's contract had a clause that as long as the policy was in effect she would continue to get those residual commissions.

If you think about it it can't be self employed income because she was not self employed. It can't be W2 income either because her husband was dead. It could have been income to the estate but then it should have been paid as such.

In this case how much money are we talking about? Generally those residual commissions checks are less than $600 for the year that I seem to recall.

Commissions have been averaging about $1,000 a year.

[ATSMAN]

Commissions have been averaging about $1,000 a year.

Nice little income for the widow!

[Burke]

If she has been reporting SE tax for the last 4 years, amend what you can.....