@CindyKR wrote:
I just got the tax form for the bonus for my spouse. Unfortunately, they reported it on a W-2 in my spouse's name. Now what?
This situation is covered in IRS Revenue Ruling 64-150. Since the "64" means 1964, it;s not online at the IRS web site, but it is online here.
https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev-rul-64-150/d47j
Here are two lawyer blog posts discussing the issue.
https://www.employerslawyersblog.com/2016/09/tax-reporting-for-deferred-compensation-payments-follow...
https://kahnlitwin.com/blogs/tax-blog/how-do-you-report-deferred-compensation-when-an-employee-dies
Your next step is to contact the employer and ask that the W-2 be canceled and ask for a 1099-MISC. Point out the revenue ruling and the fact that they save on social security and medicare tax too. Keep your correspondence in writing and keep copies.
If they refuse to correct the problem, your federal and state income tax will be the same either way, but you are being cheated out of the social security and medicare withholding that should not have been made. You can report the income as if it was on a 1099-MISC in turbotax. Make sure to include any federal tax that was withheld (from box 2 of the W-2, goes into box 4 of the 1099-MISC) and state tax withheld (from box 17 of the W-2, goes into box 16 of the 1099-MISC).
If the IRS sends a letter asking about the W-2, reply by telling the story (bonus paid in the year after death) and include copies of your correspondence, and explain that you included the income as "other income" on your tax return following the rules for "Income in respect of a decedent."
Then, to get a refund of the mistakenly withheld social security and medicare tax, you will need to file form 843. Again, include your story, copy of the death certificate, copy of the bonus check or deposit showing it was paid in the following calendar year, correspondence with the employer, etc.
https://www.irs.gov/forms-pubs/about-form-843
