Final Social Security monthly payment received by estate. Two beneficiaries. Can I prepare K-1 so the payment retains its SS identity when reported on beneficiaries 1040?

[MyMichael]

One beneficiary is retired and receiving his own SSA benefits and SSA-1099.  The other beneficiary is also retired, but is not eligible for SS due to the Govt. Pension Offset rules.

[ToddL]

A final social security check is income with respect to the decedent (IRD) and should be reported on the decedent's final tax return (for tax purposes); any taxes withheld on social security income are also reported on the decedent's final return. 

The actual proceeds of the final social security check are just treated as distributions to the beneficiaries (inheritances); not taxable to them.

[ronlhurley]

Is this true?? we received a SS check after our mother's passing made out to my wife with her TIN and the O/A/O designation. Several other chats indicate that my wife must pay federal taxes on this disbursement. The issue is that our tax (my wife) return has been completed for 2020 and we would have file an amended return where as our deceased mother return has not been filed. Any options to report this income to our mother's estate?

[JeffreyR77]

No, it truly is Income in Respect to a Decedent and would have been issued in your mother's ssn. As Social Security has issued it to your wife, she will need to report it as a 1099-R on her return.

[HydroSci]

559 states that "Wages paid as income in respect of a decedent aren't subject to federal income tax withholding. However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. These wages aren't included in box 1 of Form W-2."  Other info statesthat1099-R pensions are treated similarly.  Does a pension payment received after death require a 1099-Misc and adjust 1099-R? 

[HydroSci]

Also: Wrapping up an estate. The final personal taxes for the deceased resulted in a state tax refund that will not be taxable (return was not itemized).  If the only income to the estate in 2022 is that nontaxable 1099-G, does the estate need to file for 2022?  (If yes, then I will suggest that it be donated to charity on the personal state return to avoid another year of estate taxes.)

[HydroSci]

The 559 statement in question is actually: ""If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement... income in respect of a decedent aren't subject to federal income tax withholding."  They are talking about wages.  But my understanding is that 1099-R pension income falls under the same umbrella.

[DianeW777]

The answers to your questions are posted below.

Question: Does a pension payment received after death require a 1099-Misc and adjust 1099-R? 

• No. A pension, even after death, would still be reported on Form 1099-R, it should not be reported on Form 1099-MISC.  And it is not subject to social security or medicare taxes. The pension does not require any adjustment if it shows only the portion received by the decedent while they were alive.  A second Form 1099-R should be issued to the beneficiary after death if applicable.

Question: If the only income to the estate in 2022 is that nontaxable 1099-G, does the estate need to file for 2022?

• No. An estate return is not required if there is less than $600 of taxable income, The Form 1099-G for a refund of state income tax when itemized deductions were not used the previous tax year is not taxable income in the current year.  See IRS Filing the Estate.

Please update here if you need further assistance.

@HydroSci