How do I allocate decedents final pension check, concerning income, state and federal taxes, between Form 1040 and Form 1041?

[air2dmw]

My mother died in the middle of a month and her pension check was received at end of the same month.  Her pension check has deduction for state income tax.  This was not Social Security but her employer pension.

[AnnetteB6]

If the final pension payment was received after her date of death, then it will be allocated in full to the Form 1041.  If it was received prior to her death, then it will be reported on Form 1040. 

You do not need to allocate the amount to the date of death, when the payment is received will determine which form it is reported on.  

My condolences for your loss.

[Kennbu]

I read your previous reply because I am in the exact same situation in filing my sister inlaws taxes. I get that the amount after death is input on the 1041. Do I record the full amount of the 1099-R on the 1040 and deduct the overage and deductions somewhere else? If so, where? On the 1041, I am confused as to where to put the deductions on the 1041 from her final payment. 

[DaveF1006]

It depends. One of the most intriguing things about trust account is that they do not have a separate category to report 1099-R. As a result, this is how you report.

1. Click the Federal Taxes tab and then click "Income".
2. Click the Start (or Update) button to the right of "Other income or loss".
3. On the Other Income page, enter "Ordinary income from 1099-R Box 2a" as the description.
4. Enter the amount treated as ordinary income in Box 2a under "Amount" and click the Continue button.
5. To claim a deduction against the overages and other deductions, go to the deductions tab
6. Go to expenses, taxes, and fees
7. Select other deductions
8. Here is where you list these deductions.  Here you enter an explanation stating these deductions that were taken form the distribution from the 1099-R.  Enter as 1099-R deductions and overages and then the amount of the deduction.
9. Now you can verify this by going to your forms and verifying on your 1041 the following:

•  Your 1099-R for the full amount will be on line 8 of the form
• Your deductions will appear on Line 15A

[Kennbu]

Do I input the amount only prior to death on the 1040 or do I put the whole amount?

It appears that you are referring to the 1041 process only. Unfortunately, I am doing the work on a MAC and Turbo tax does not have the 1041 on a MAC for some reason. Do you know I can install same Turbo tax product I purchased on the windows pc? 

[DawnC]

Only the amounts constructively received before her death go on the personal Form 1040.   Any income received after death goes on Form 1041 or the tax return of the beneficiary who received it.   In order to prepare a trust income tax return, you need TurboTax Business - which is only available on the Windows platform; there is not a MAC version, unfortunately.  The link has more information.   And yes, David is referring to a Form 1041 - not the final personal tax return.   

Upon the death of a taxpayer, a new taxpaying entity—the taxpayer's estate—is born to make sure no taxable income falls through the cracks. Generally, income is taxed either on the taxpayer's final return, on the return of the beneficiary who acquires the right to receive the income, or if the estate receives $600 or more of income, on the estate's income tax return (Form 1041). 

For more information on filing a final return, please see Death in the Family.    @Kennbu

[Ken110]

Thank you for your response.

I do understand that the amount must be split, however, I still need clarification. Given the following example:

1099R= $10,000

Prior=$9,000

After death=$1,000

1040 line 5b = $10,000

Your “Death in family” link says “you must report the entire amount ($10,000) on Schedule B of the decedent's return”

Schedule  B explicitly states that it’s for 1099-INT or 1099-OID “Interest and dividends ”, not pension income. So I am to report pension income here received after death even though Schedule B does not mention pension income?

The link goes on to say “then deduct the amount that is being reported by the estate or other beneficiary who actually received the income.”

Where should this $1,000 be deducted?

[WendyN2]

It actually means to deduct that amount before you enter it - the wording can be a little tricky. Therefore, whatever else is being reported on the estate return from date of death forward would not be doubled up on the 1040.

[Kennbu]

Thank you

[Kennbu]

Do I have to include on the New York State residential return, the 1099R after death amount excluded from the 1040 and entered on the 1041  or can leave it at the 1040 amount? Note, including this amount would not make a difference on the bottom line of the NYS tax return because the 1099R income is not taxed by NY.

[DianeW777]

Leave the 1040 amount.  The New York (NY) state return would include income for the decedent only up to the date of death.  Anything received after that date would not go on the decedent's individual tax return.

The balance of the Form 1099-R income that was received by the beneficiary would be reported on the return of the beneficiary or the estate return, whichever is applicable.