Deceased husband's wages from 2016

[DPaige55]

My husband died in 2016.  Apparently he was working a side job that I was not aware of that paid him in 2016 but the wages were not cashed or claimed (we were separated at the time, but he died before the divorce was final, so I am his widow).  I was notified by the State of California of these unclaimed wages earlier this year (2021) and filed a claim to obtain them from the state, along with checks that the company still had that they could reissue to me.  The wages amount to about $4500.00.  A W-2 apparently was issued for these wages, but I never received it.  So taxes filed in 2017 on his behalf did not reflect any of this income, since it wasn't known.  I have requested a copy of the W2, but do I need to claim this as income now and if so how would that be done?  

[Anonymous_]

The wages must be reported, regardless.

This would typically be considered income in respect of a decedent.

See https://www.irs.gov/publications/p559#en_US_2020_publink100099595

If the wages were paid after the year of death, they are not subject to withholding. 

[Opus 17]

This is how I see it.

The tax deadline for filing a 2016 return was April 15, 2017.  That means the statute of limitations on auditing a tax return ran out April 15, 2020 (for federal, 3 years) and April 15, 2021 (4 years for California).  If they haven't billed you for the tax, you are in the clear.  Alternatively, if adding the wages plus the withholding would have resulted in a refund, you can't get it by filing an amended return.

You are also in the clear if you filed your 2016 return as "married filing separately" because filing MFS makes you legally separate from your spouse's tax issues or problems.

I assume taxes were withheld, and I suspect the taxes withheld were more than were owed, otherwise the state would have sent a bill for unpaid taxes.  You can get a 2016 transcript for your husband's IRS account.  You will have to request on paper since its too old for an online request.  Be sure to get both a wage and income transcript and a tax transcript.  The wage and income transcript will include the W-2 if one was issued.  You may find the IRS already adjusted his account for the excess wages and found that no extra tax was due, which is why they never sent a bill.

https://www.irs.gov/individuals/get-transcript

Since taxes were already withheld and paid, you don't need to report these wages as your income in 2021.  I think you cash the checks and close the book.

[Anonymous_]

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@Opus 17 wrote:

......filing MFS makes you legally separate from your spouse's tax issues or problems.

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That absolutely does not hold true in all cases in community property states.