How does beneficiary report inherited CD interest from POD account

[hellodolly1]

Hi,

My dad passed away January 2025, and I inherited a POD CD account. I was listed as the POD beneficiary on this CD bank account. This January , I received a 2025 1099-INT for the interest earned on this account (approx. $900), but the 1099-INT lists my dad's SSN.  I called the bank who issued the 1099-INT and they said they cannot change the 1099INT to my SSN. Bank said they could change it to estate's EIN if we wanted to, but only thru working with the legal personal representative (my sibling). There is no trust involved for the CD. The CD did not go through probate since POD.  I understand that the principal is not reported/taxed (is an amount less than estate tax limits).

My impression (from reading on TT) is that any interest earned/paid from time of dad's death to CD close/maturity date should be reported on my (the POD beneficiary) 2025 tax return. But someone else stated that the inherited CD interest should be reported on the estate's tax return for 2025.

Questions:

1. Who reports the inherited CD interest from time of death in January till close of CD for a POD CD for 2025? (for practical purposes, I think all of the 2025 interest was earned/paid to account after dad's date of passing).

2. If it is the beneficiary who should report, will the IRS be puzzled if I (beneficiary) report the inherited CD interest on my 2025 1040 tax return, because they will *not* have received a 1099-INT from bank under my SSN for the $900 interest?

3. Does my dad/dad's estate need to submit a nominee 1099-INT to let the IRS know that the interest should go on the beneficiary's tax return (not sure if I have the correct terminology)?  Currently the 1099-INT is under dad's SSN.  If needed, how would one do a nominee 1099-INT (ie from dad's SSN to dad's estate EIN to beneficiary SSN? Sounds complicated : )

Thank you so much for your help in advance!!

[Mike9241]

Sorry for your loss. On your return, report it as interest income from bank x on Form 1099-INT. The IRS should not care that the SSN's don't match because you are reporting income.

some may argue the interest should be reported on form for your dad's estate and a K-1 issued to you for the interest you received. (It's technically Income in respect of a decedent - IRD)  There is a general exception for the 1041 if the gross income is under $600.

from the iRS

Income in respect of a decedent (IRD). When completing Form 1041, you must take into account any items that are IRD.
In general, IRD is income that a decedent was entitled to receive but that was not properly includible in the decedent’s final income tax return under the decedent’s method of accounting.

IRD includes:

All accrued income of a decedent who reported their income on the cash method of accounting,
The IRD has the same character it would have had if the decedent had lived and received such amount.

[ReneV4]

Correct. You should report the interest on your return using the "nominee" adjustment. It sounds complicated, but TurboTax makes it easy. Because the CD was a Payable on Death (POD), ownership transferred to you upon your father's death. Under IRS rules, any income earned after the date of death is taxable to the person who actually owns the asset. 

Therefore, any pre-death interest should be reported on your father's final 1040 and post-death interest should be reported by you. Since the CD bypassed probate via the POD designation, the estate never owned the money, so it generally should not be on an estate return.

Here is how to make a "nominee" adjustment in TurboTax:

1. Go to "Wages & Income", then Investments and savings and select +Add investments 
2. Select, Enter a different way, then Interest on 1099-INT
3. Select, "Type it in myself"
4. Enter the Payer's information and total interest in Box 1 and indicate it belongs to you in the drop down box to the right
5. Check the top box on the next screen "I need to adjust the interest reported on my form", then Continue 
6. Next, enter the interest amount from box 1 again here 
7. Select, "I received all or part of this interest for someone else (I am a nominee), then Continue
8. Next, you will go back and create a new 1099-INT to report the interest on your return 
9. Enter the interest in Box 1. You do not need to use the nominee adjustment for this second entry
10. Ensure you tell your sibling that you are reporting the interest as a nominee on your return so that they do not report it on your father's return

[hellodolly1]

Thank you so much for your reply ReneV4! Sorry for delay in responding.

Just to clarify, since the 1099-INT was in my dad's name and SSN, would *he* (or his estate?) be the nominee, rather than me? 

So when I get to the statement "I received all or part of this interest for someone else (I am a nominee) on *my return*, would I not select that option and instead chose None of these apply or something to that effect?

Perhaps that statement (...I am a nominee) would be more applicable to select on my dad's return for 2025 tax year? 

Thank you in advance for clarifying.

[hellodolly1]

Thank you for your prompt response, Mike 9241! Sorry for the delay in responding.

So much new terminology --thanks for your explanation of IRD. I'm hoping the IRS doesn't care that the SSNs don't match since someone (me) will be paying taxes on it. 

My brother is doing my dad's taxes for 2025, so I'm thinking we should coordinate so that both parties don't end up paying taxes on amount (all the CD interest was credited to the CD account *after* his death, so I understand I am responsible for taxes on the full amount). I do not know if his gross income was above or below $600, but guessing it was below.

Thank you again!