Taxes on an inherited deferred compensation plan?

Forum|Forum|7 years ago
June 4, 2019
11 replies
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My father died before receiving all of his deferred compensation. I am the beneficiary of it, and received my first payment in 2018. No taxes were withheld -- the employer said FICA taxes did not apply since his death was the prior year.

I received a 1099-MISC. When I enter it into TurobTax, it treats it as business income and says self-employment tax is due. Is this correct? I thought only income taxes needed to be paid on it.

TurboTax Deluxe Online

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DavidD66

Level 15

You are correct, since your father died in the year prior to the proceeds being paid out, the proceeds are not subject to FICA taxes. They are taxable as ordinary income. To enter in TurboTax Online, while logged in to your account and in your return:

Type "Form 1099 Misc" in the search window and hit enter
Click on "Jump to Form 1099 Misc"
Answer "Yes" to Did you get a 1099-MISC?
Enter the information from your 1099-MISC
Enter a description such as "Inherited Deferred Comp"
Mark choice "none of these apply" for "Does one of these uncommon situations apply?"
Indicate "No, it didn't involve work like [your] main job.
Continue with the interview, and your income will appear as ordinary income not subject to self-employment tax