IRS 1099 INT for deceased taxpayer

[DTFHS]

I received a 1099 INT from the IRS For 2020.  My father passed away in 2020 and had a revocable trust that filed under his SSN.  After his passing the trust received an EIN from the IRS for the revocable trust.  I prepared and filed the Trust 2020 taxes under his SSN up to the date of death.  I also filed Trust taxes under the Trust EIN for the remainder of the year.  I received a 1099 INT from the IRS as a result of interest received from the extended filing date of 2020 taxes (Like many others have).  The difficulty I am having is the 1099 INT is under his SSN and there are no taxes to be filed under his SSN as he is deceased since 2020.   So my question is.....how do I handle this 1099 INT?

[KrisD15 · Accepted solution]

Since this was interest earned after the date of passing, and since you are the beneficiary, you would claim the interest. 

You can enter the 1099-INT as if it were your own. 

"If you receive interest that accrued but was not paid prior to the owner's death, however, it is considered income in respect of a decedent and is taxable on your return."

TurboTax Link

Additionally, in your situation, there would have been no expenses or tax paid on this income by the decedent or the  estate prior to you receiving it. Simply add the 1099-INT on your return and keep with your tax files. 

IRS PUB 559

[cactusjack]

This response appears to contradict the advice shown below (see link for full post).

Wouldn't this be considered nominee income, triggering the need to file a new 1099 with the IRS?

My situation:

- Mother passed away in 2021.  Final tax return for her was filed in April 2022.

- Received a 1099-INT from a bank for 2022 tied to my mother's SSN. The bank account is under a family trust, which is also tied to her SSN. The trust became irrevocable when she died (we obtained an EIN for the irrevocable trust).   I'm filing a return for the trust, but this 1099-INT uses her SSN and not the EIN for the trust.  My brother and I are co-trustees.

Like the discussion below, wouldn't the 1099-INT income be considered nominee income for the irrevocable trust, triggering the need for me to file a new 1099 with the IRS?

Thanks.

https://ttlc.intuit.com/community/taxes/discussion/1099-split-for-deceased-recipient/00/2047870 

 DianeW777

Employee Tax Expert

‎March 15, 2021 7:12 AM

Nominee Actions/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 yourself or the original Payee as the payer and the other owner, as the recipient. On Form 1096, list yourself or the original Payee 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.

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: 

• Form 1096-Transmittal 
• Form 1099-DIV 2020

Split the amount as needed and enter only the necessary portions on the appropriate returns.

[ErnieS0]

Yes. The person handling your mother’s affairs would issue a nominee Form 1099-INT to the trust.

First, try and get the payor to reissue Form 1099-INT to the trust because technically you'd have to file a Form 1041 for your mother to add the interest and remove it.

TurboTax says:

Only interest earned up to that date would be reported on the final tax return. Earnings after that date are taxable to the beneficiary of the account, or to the estate.

That can create some hassles since the payer—a mutual fund, bank or broker, for example—will report income to the IRS on a 1099 form. Although you should try to get ownership of the account changed as quickly as possible after the death of the owner, the 1099 income report may well show more income assigned to the decedent than it should. 

In such cases, you'll need to report the entire amount on Schedule B of the decedent's return, and then deduct the amount that is being reported by the estate or other beneficiary who actually received the income.

See Death in the Family.

@cactusjack 

[cactusjack]

Thank you.