Is a form 1099-R sent in the name of an estate considered earned income for the estate?

[mplsjdoe]

I had to set up an estate account for my deceased uncle because the one of his financial institutions would not send the distribution to me directly.  I set up a new estate bank account to deposit the checks into, then closed it about 6 months later.  The amount was about $90,000 in the form of a total distribution from his old accounts.  The financial institution sent me 2 1099-R forms addressed to his estate.  Is this considered earned income for the estate even though it was just inherited money and transferred to the bank and then to me?  Do I file a return for his estate using the 1099-R and estate tax forms and then form 706 for me personally having taken the money?  

[dmertz]

It is unearned income to the estate that must be reported on the estate's income tax return (Form 1041) for the estate income tax year in which the distribution was received by the estate.  The distribution is taxable in the same manner as it would have been taxable to your uncle had it been distributed to your uncle prior to death (except that it is not subject to any early-distribution penalty).  The estate 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 (Form 1041).  You would report the 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 taxable amount of this income is reported on Form 1041 line 8.

The estate tax return (Form 706) will include the value of the retirement account regardless of how it was distributed.

[dpendl]

So we have 10 people that received equal shares of a stock sale for my deceased mother's estate

The proceeds of the sale where deposited into an estate account where equal checks were sent to the 10 benefactors of the account. The estate received the 1099 but the account is now closed.

How do we handle the 1099 as I have never filed a tax form for this estate. (i did previously file a Turbo individual , Mary Jane Pendl, the year my mom passed)

[RobertB4444]

Since you already distributed the income the best thing to do is to pass this income through to the heirs as @dpendl suggests above.  You will prepare a form 1041 which will have all of the income from the 1099-R and a 1099-B if you receive it.  Then you will need the name, address and social security numbers of all 10 heirs as well as their percentage of the inheritance.  You will enter all of that information into the 1041 and then the estate will not owe taxes on the money that it earned, the heirs will enter it on their personal tax returns and pay the taxes out of the inheritance that they received.

Here is some guidance on filing a 1041 with TurboTax.

[dmertz]

If this stock was not held in a qualified retirement account and the Form 1099 you received is a 1099-B, not a 1099-R, the stock received a step up in basis to the date-of-death value which would be used to determine how much taxable income passes through to each beneficiary.  If the taxable income to the estate during the estate's tax year is less than $600, no filing is required.  Still, if there is a loss it might be beneficial to the beneficiaries to file and pass the loss through to beneficiaries to be used on their individual tax returns.

If this was a distribution from a retirement account and you received a Form 1099-R, the total taxable amount that needs to be passed through to beneficiaries is usually the amount shown in box 2a of this form.

TurboTax Business (not Home & Business) is available for preparing Form 1041.

[dvincepact]

What if the 1099R is addressed to "Decedent Estate" but has the decedents SSN on it?  Can you simply include that 1099R on an estate 1041 after a an EIN is created?  This is a year 2021 1099R for a death that occurred in 2020.  Thanks 

[ThomasM125]

Yes, you would enter that income on the estate tax return. You shouldn't prepare a personal tax return for the decedent after the year of death, so you need to report their income on the estate tax return. 

@dvincepact

[dvincepact]

@ThomasM125 I wasn't planning on a year later personal return.  This 1099R was many years ago deceased husband money that had wife as beneficiary who is one now deceased in 2020.   Apparently the husband needed to distribute to now deceased wife before it could go to children.  1099R had code 4 distribution to the deceased wife's SSN after she was deceased.  So I wanted to create an estate to K-1 the money to 6 kids.   You figure no problem with no EIN on 1099R?  I figure the SS-4 to get EIN connects the deceased mom SSN to the new EIN.  Or one could hope.  Thanks for your pointers.

[ThomasM125]

The important thing is to report the income on the correct return. Since the money belongs to the estate, it should be reported on the estate tax return. The worst that could happen is the IRS will request a return for the deceased taxpayer, but that is unlikely if you filed a personal tax return in the year of death reporting the death of the taxpayer.

If you do get a notice requesting a personal tax return reporting the income, you can simply explain that it was already reported on the estate tax return and that should settle the matter.

@dvincepac

[Camaro2013]

If I am the only one to have to pay tax on this 1099-R how do I file this form?  Also I have already done my personal return already.

[Critter-3]

@Camaro2013 

Not enough info to give you an answer and you tacked onto a thread talking about several different items.

First ... the 1099-R ... who was it issued to exactly ?   You  or the estate ?  

[Camaro2013]

The estate

[Critter-3]

Ok ... so whoever is in charge of the estate needs to file a tax return form 1041  which will produce a K-1 which  needs to be entered on your amended return.  

[Camaro2013]

I am the Administrator of the Estate and the 1099-R is filed under my TIN number

[Critter-3]

OK ... YOU have a SS# not an ITIN.  If the 1099-R was issue to YOU in your SS# then there is no need for an estate return to be filed.  Enter the 1099-R on your personal amended return.

Now if the 1099-R was issued in the name of the estate in the estate's  EIN  then an estate return needs to be done.  If you are unsure of what needs to be done then use a local tax pro that you can talk with face to face.