Duplicate 1099 Forms Issued to Deceased Mother and Trust

[cactusjack]

My mother had investments as part of a family trust that used her SSN.  She passed away in October 2021, after which the investments were held in an irrevocable trust with an EIN.

The brokerage company provided 1099-DIV forms for both my mother (in her SSN) and the trust (in the EIN) that show IDENTICAL amounts in the boxes. So I have two (2) 1099s that both show incorrect information. The brokerage company refused to issue corrected forms.

QUESTION #1:

What's the proper way to address this since the amounts need to be divided amongst the 2 returns?

Option A: 

-Report the full amounts on both returns (my mother's and the trust)

-Make the necessary adjustments as negative numbers on both returns

-File a 1099-DIV (along with 1096 form) from my mother to the trust

-File a 1099-DIV (along with 1096 form) from the trust to my mother

Option B: 

-Same as Option A, except I would only file 1099s/1096s from my mother to the trust (assuming the IRS will be able to follow the money trail). 

Option C: 

-Other approach?

QUESTION #2:

We also received 1099-B forms for both my mother and the trust.  No stocks were sold while my mother was alive, so I adjusted the amount on her personal return and indicated the entire proceeds were received as a nominee.  I did not reference the trust or EIN on my mother's return.  The correct cost-basis was applied within the trust's return.

Do I need to send any 1099-Bs and 1096 forms between my mother's return and trust return for this income?  The IRS instructions say this is required for 1099-DIV forms, but don't mention it for 1099-Bs.  Is there anything else I need to do here?

Thanks.

[cactusjack]

Bumping this post to see if there are any experts with answers.

Thanks.

[DianeW777]

Yes, the actions you describe can be taken and the information is explained below.

QUESTION #1:

What's the proper way to address this since the amounts need to be divided amongst the 2 returns?

• If the Forms 1099-DIV do not represent the amount that should be reportable on each separate return then you can enter the appropriate amount on each return.  If they are actually duplicated and double the income then you will pay tax on only the actual dividends earned during the year.  Keep your records should you need to prove actual dividends earned for the entire year (statements showing the dividends for the year).
  1. The final return of the decedent should show dividend income earned up to the date of death.
  2. The estate tax return would report the dividends earned from the date of death to the end of the year.

You can file the Form 1099-DIV and Form 1096 only to distribute the actual dividend that should be reported to the other party. This is called a nominee action. 

Once you confirm the total dividends earned for the year use that figure only.  If the full amount is reported on the form using the SSN of the decedent  figure out what is required to be reported on the final return, then nominee the difference to the EIN. 

You cannot correct any mistake by the financial agent who issued the 1099s, only the actual income to report on each return.

I suggest taking the same action for the Form 1099-B.

Nominee returns. 

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list decedent as the payer and the other owner, as the recipient. On Form 1096, list decedent as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

[cactusjack]

Thank you for the response.  However, wouldn't filing 1099s for each return result in doubling the amounts reported for each?  See below for the actual amount reported in Box 1a of the 1099-DIV.  The numbers are rounded to simplify, but are close to actual.

Total Ordinary Dividends received = $16,000

Applicable to Decedent = $11,000

Applicable to Estate = $5,000

1099-DIV Box 1a reported to Decedent = $16,000

1099-DIV Box 1a reported to Estate = $16,000

Filing a 1099-DIV from the Decedent to Estate for $5000 results in adjusted amounts as follows:

Decedent = $16,000 - $5,000 = $11,000

Estate = $16,000 + $5,000 = $21,000

Next, if we file a 1099-DIV from the Estate to Decedent for $11,000, the adjusted amounts are as follows:

Decedent = $11,000 + $11,000 = $22,000

Estate = $21,000 - $11,000 = $10,000

End Result:

Decedent = $22,000 but should be $11,000

Estate = $10,000 but should be $5,000

It seems like the brokerage reported twice the amount it should have ($32,000 instead of $16,000), so amounts need to be subtracted from each account, whereas sending 1099s between the two returns simply moves the doubled money between the accounts.

Please correct me if I'm understanding this wrong.   I would really like to avoid having to attach an explanation letter since it will draw more attention to the situation.

Let me know what you think.

Thanks.

P.S.  We originally just received one 1099-DIV for the decedent that showed $16,000 in Box 1a.  I requested a corrected 1099 for the decedent and a 1099 for the estate.  The brokerage refused to issue a corrected form for the decedent, and proceeded to issue a 1099 to the estate with $16,000 in Box 1a.

[AmyC · Accepted solution]

Filing a 1099 to pass the income to the correct entity is what the IRS desires but with your doubled case of inaccurate forms, it makes the situation too complicated. Since you were sent duplicate forms with different identification numbers and the company is no help, simply keep track of your documentation, including asking here, it shows you are trying to do the right thing and what the issue is. Report what is correct on each return. No extra information or explanation attached. Just e-file the returns.

If you are audited in 3 or 4 years, you have a paper trail to prove whichever return may be questioned. The IRS understands paperwork issues. Simply be able to prove what is correct, if needed.

Her personal return should have nothing regarding the estate.

I am sorry for your loss.

[cactusjack]

Thank you AmyC!  I appreciate the response.  I will proceed as noted and keep this for documentation as you've  suggested.

Thanks again!