Question about 1099- R for a deceased family member.
My adult, 58year old, disabled, brother lived and died in Maryland in 2021. I am the Estate Administrator, and the sole beneficiary, and live in Wisconsin.
In 2022 a retirement account was cashed out to the Estate, and a 1099-R was received using the EIN of the Estate that withheld state tax for Wisconsin and none federally. I did not receive a K-1.
I am trying to understand if I have to actually file a tax return for the decedent if this is the only income received by the estate in 2022. I have seen conflicting advice on these forums.
Option 1 – I need to file a tax return for the Estate.
Option 2 – I can put this 1099-R information into a Schedule K-1 (Form 1041), which allows me to declare it on my personal tax return and that it would show up on my 1041 on line 8.
Can some one help me determine which option is correct?
More details….
Option 1 details- The forum expert said that “withheld income taxes can't be passed through to beneficiaries on either Schedule K-1 or Form 1041-T.” Which means, I think, that I will need to file a separate return for the decedent, using their EIN number, not the SSN, and a State of WI non-resident form to pay the federal taxes due, and to receive the excess WI withholding refund.
Option 2 details – The forum expert says I can pass this “Distributable Net Income through to beneficiaries of the estate, to be taxable to the estate beneficiaries instead of to the estate, by reporting it on Schedule K-1 on your personal tax return for the year that includes the end date of this estate's tax year covered by this Schedule K-1. The estate tax return (Form 706) will include the value of the retirement account regardless of how it was distributed.” This sounds preferable, but I did not get a K-1. And the 706 form is confusing, in that the estate was not large, and not gifts were made prior to death so I am not seeing why I need to file that.
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Option 1: This means that you must file an estate tax return. You cannot change the social security number (SSN) to an EIN on an individual tax return. Estate tax return is Form 1041.
Option 2: No form 706 should be filed. Instead file Form 1041 for the income received after the death of your brother.
Option 3: Nominee the distribution to you if you received all the income from the 1099-R. This allows you to file it on your own tax return, and if there is no other money earned after the death of your brother (interest, dividends, etc), then an estate return is not required (Form 1041).
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, if applicable.
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)
The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:
Thank you for this fantastic answer. I did not know about Nominee Returns.
By the way, for anyone else using this answer, these tax forms are very hard to find even online. Here is the proper link to get them
https://apps.irs.gov/app/taxmat/information-employer-returns/
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