1099-C for Deceased Grandfather

[Sdpm99]

Hello,

I hope I can obtain some help as I am not sure how to proceed.

My grandfather passed away in 2024. He resided in Louisiana with his wife. Both were on social security and were not required to file tax returns. We went through a succession and the property that he did have, a home and a vehicle, was transferred to my grandmother, his surviving wife. She is still alive. I am his grandson and I have been trying to handle his affairs.

There was a cancelation of credit card debt and we received a 1099-C. The 1099-C is in his name with his social security number, but he is deceased. Do I need to file this? If so, how do I file this? He has not filed a return in years - neither has my grandmother. 

Thank you!

[DaveF1006]

 Yes, their Social Security income may now be taxable if:

• If combined income is between $32,000 and $44,000, up to 50% of Social Security benefits may be taxable.
• If combined income exceeds $44,000, up to 85% of benefits may be taxable.

Their Combined income is calculated as:

• 1099 C income 
• Half of Social Security benefits

As far as filing a tax return, if the amount of the 1099 C and taxable Social Security exceeds $30,750 (Standard Deduction for a Married File Jointly), there is a filing requirement for your grandparents.

[Sdpm99]

Thank you for the reply! My grandfather is deceased. Based on the criteria you listed, his social security income would not be taxable, and neither would my grandmothers. They have not filed a return in quite some time. 

However, the 1099-C alone, in his name, is an issue for me as I dont know how to proceed or file this as he is deceased and would not have needed to file a return for 2024 anyway. If I file the 1099-C alone, whose name should it be filed under? 

Can turbo tax handle this and make it easy for me? If so, should we begin the process under my grandmothers name or mine as I am the one trying to handle his affairs.

[AmyC]

Take this quick quiz and enter the social security and the 1099-C to see if there is a  Filing requirement. If your grandmother and grandfather were married, they could file joint and exclude up to $29,200 of taxable income (more if over 65 or blind). Since we don't know the amount of cancelled debt, there may not be a need to file.

[Sdpm99]

Thank you for the reply! The amount of debt canceled was $12000. She is in her 80s.

On the IRS quiz, as for the combined gross income for both of them, does that include their combined social security benefits for the year? Does that also include the 1099-C?

Thanks!

[DaveF1006]

Yes, this would include the 1099C amount.

[Sdpm99]

Okay after following the IRS worksheet, I answered all of the questions given to me, honestly with exact numbers. I entered their combined social security income when asked and then entered the $12000 in canceled debt into the gross income box after following the instructions - I did not meet the criteria to enter any part of their social security benefits into this box, so it was just the $12000 in discharged debt.

After answering everything, it stated that she would not need to file because the total income did not exceed $32,000.

So I guess that answers my question? Just keep the 1099-C tucked away in the case I need it and don't file a return?

[AmyC]

Correct! The cancelled debt is below the filing threshold and low enough to not create any taxable Social Security income. Well done!

[Sdpm99]

Excellent. 

Thank you all so much for the help! I kept thinking of the 1099-C as separate from their social security income and therefore would be taxable. I did not realize that there was a specific threshold, gross income plus 50% of combined (filing jointly) social security benefits that needed to be met for any portion of the income to be considered taxable.

Even if my grandmother filed independently, she would not hit the $25,000 threshold, including the $12000 in gross income from the 1099-C.

[Sdpm99]

Amy, just one more question. Sorry!

Hypothetically, filing jointly would have been possible even though he passed early in 2024, correct? Because he was still alive for a portion of that year?

[AmyC]

Yes, you can file joint for the year of passing.  You are doing a great job. Grandma owes you a big hug.