Hi!
I've never posted before but have found such helpful information here. My mother passed and I'm trying to finish her final return (2023) and need some help and guidance.
She unexpectedly passed in August 2023. She had no assets other than a couple of bank accounts that were POD to either me or my brother, so we didn't file probate as there is no estate so to say.
She had a few credit cards, one with quite a large balance of over $15,000 (we didn't even know). I informed all of the banks and credit cards of her passing in a timely manner.
At tax time, Wells Fargo (the one with the large balance) mailed me a 1099-C. I've read about this situation on this forum, but I'm still confused. Here are the details:
The 1099-C doesn't just have her name, it says Her Name "In Care of" and then My Name with my address. I have no idea why my name is on there other than the fact I am the one that informed them of her passing. The card was in her name only. Having my name on there makes me very nervous and confused.
Box 1: 09/26/2023 which is AFTER her passing (she passed in August 2023).
Box 6: G (decision or policy to discontinue collection)
Because I was unsure of what to do, I counted this as income and filed an extension, paying the estimated federal and state taxes to avoid a penalty.
My question is whether or not it should be counted as income because of the info in Boxes 1 and 6. Had the debt been forgiven prior to her passing, that seems more clear cut. But since it was after, I read somewhere that it might not need to be counted.
Any help or guidance is so very much appreciated!!
If her estate had no assets then you have nothing to worry about. Write the creditors and inform them there were no assets in her estate and the estate is insolvent with the debt.
Yes it's income but if after her passing it is income to her estate and that estate would be insolvent. You could file a 1041 and a 982.
You don't need to go through probate but you should apply - online - for an EIN for the estate.
If her estate had no assets then you have nothing to worry about. Write the creditors and inform them there were no assets in her estate and the estate is insolvent with the debt.
Thanks!! I'll do that. But will the IRS expect the forgiven debt reported on the 1099-C to be counted as income on her return? I read that it does have to be counted. But then I wondered if that isn't true in this case since the debt was forgiven after she passed.
Yes it's income but if after her passing it is income to her estate and that estate would be insolvent. You could file a 1041 and a 982.
Gotcha. Is it fine to file the 1041 to report the 1099-C "income" even though I didn't officially create an estate or do probate?
Also, would I also still file a 1040 since she had income from her pension and had some interest?
Thanks so much!!
You don't need to go through probate but you should apply - online - for an EIN for the estate.
File a 1040 if she received the income while she was alive.