Mother passed away 9/4/19, I am executor. She had social security plus 1099 interest. Both reported to her individual SSN. Does I have to report an estate tax return?

[sledhead1966]

All income was reported to the IRS using her social security number.  An estate tax ID was created, but nothing was reported as income to that ID.  Can I just file a normal individual tax return or is an estate tax return required?

[tagteam · Accepted solution]

I am very sorry for your loss.

A Form 1041 for the estate is not required to be filed unless the estate has income of $600 or more.

See https://www.irs.gov/instructions/i1041#idm140366311417136

[dmertz]

If these report income that she received before she died, this income goes on her 2019 individual tax return.

[sledhead1966]

Maybe if I could ask another question.  The 1099-INT is over 600.  She passed on 9/4/19, the 1099 was issued at year end 2019 but issued to her and under her SSN and not the estate Tax ID that I created.  Can I include the 1099 under a personal income tax return form 1040 or is this 1099-INT required to be filed as part of an estate tax return form 1041 using the estate tax ID?

[dmertz]

The account for which the Form 1099-INT was issued should have been frozen as of the date of her death, so the Form 1099-INT should be reporting only income received prior to death and goes on her final individual tax return.  Assuming that this was not a Transfer On Death account, the funds from this account should then have been moved to the estate account and any subsequent interest earned reported on a From 1099-INT issued to the estate.  If these actions were not taken promptly after her death, the Form 1099-INT issued in her name might include interest paid to her account after her death, and in this case the proper way to handle it would be to report the entire amount on Schedule B of her individual tax return, calculate the subtotal of interest income, enter a line showing the amount that is actually income to the estate, and subtract that from the subtotal to determine the amount of interest income that is to be included in her AGI on her individual tax return.  You must then issue a Form 1099-INT to the estate for the estate's portion as a nominee distribution from her to the estate and this Form 1099-INT will be reported on the estate's income tax return if one is required to be filed.  See How to report at the end of page 5 of IRS Pub 559:  https://www.irs.gov/pub/irs-pdf/p559.pdf

[tagteam]

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@sledhead1966 wrote:

Can I include the 1099 under a personal income tax return form 1040 or is this 1099-INT required to be filed as part of an estate tax return form 1041 using the estate tax ID?

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As @dmertz indicated, you need to allocate the interest between that which was earned prior to her passing and that which was earned thereafter.

If the amount of interest earned after she passed was less than $600 (and there is no other income that accrued to the estate), a Form 1041 is not required to be filed.

[sledhead1966]

For an estate tax return, there are grandchildren beneficiaries who received a small payments and the remaining estate will be distributed to the children of the deceased.  For any estate reportable income, do I send K1s to the grandchildren or just the children of the deceased?

[tagteam]

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@sledhead1966 wrote:

For any estate reportable income, do I send K1s to the grandchildren or just the children of the deceased?

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Any beneficiaries who receive (or are deemed to have received) income have to be issued K-1s.

[dmertz]

See the instructions for Schedule K-1 (Form 1041) (page 39):

https://www.irs.gov/pub/irs-pdf/i1041.pdf

As tagteam said, a Schedule K-1 must be prepared to report each beneficiary's share of deductions, credit or taxable income, and a copy must sent to each of these beneficiaries.  The size of the distribution is irrelevant.  Distributions of estate assets (as opposed to income received by the estate) are not reported anywhere on the estate income tax return.

Also read the instructions for Schedule B (Form 1041) regarding Distributable Net Income.  The total of the distributed income shown on Schedules K-1 must agree with the calculations on Schedule B.