I'm very sorry for your loss.
You are correct. This is an issue of income in respect of a decedent and nominee interest.
As you know, income in respect of a decedent encompasses only income that the decedent had a right to receive at the time of death but that is not reported on the final return. It does not include earnings on savings or investments that accrue after death.
For example, if your mother who had money in a bank account, dies June 30. Only interest earned up to and including that date would be reported on your mother's final tax return. Earnings after that date are taxable to you, the beneficiary of the account, or to the estate.
Income in respect of a decedent encompasses only income that the decedent had a right to receive at the time of death but that is not reported on the final return. It does not include earnings on savings or investments that accrue after death. Say a taxpayer who has a substantial amount in money-market mutual funds dies June 30. Only interest earned up to and including that date would be reported on the final tax return. Earnings after that date are taxable to the beneficiary of the account, or to the estate.
In this case, we are going to report Nominee interest on the decedent's return. Nominee Interest is when some or all of the interest belongs to someone else but the entire amount was reported under your mother's Social Security number.
On your mother's return, use these steps to revisit the interest section:
- On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
This opens a box where you can type in “1099-INT” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
The search results will give you an option to “Jump to 1099-INT”
-
Click on the blue “Jump to 1099-INT” link
This will bring you to a summary of interest forms already entered. If you have already entered the interest in your return, click Edit beside the one with the nominee amount. If you have not already entered the interest in your return, keep reading for steps to take after entering the information. Follow these steps:
After you click Continue when you have finished entering the information from your Form 1099-INT, the next screen is titled “Tell us if any of these uncommon situation apply to you”
The second choice on this screen is “I need to adjust my taxable amount”
Check this box and click Continue
Then you will see a screen titled “Report Interest adjustment”
- Enter the amount as a positive number
- Check the box "I received all or part of this interest for someone else (I am a nominee).
- Click Continue
This will make the proper entry on your mother's Schedule B.
