Received 1099-R for Deceased Parent

[hybridtaxguy]

My mother passed away in December of 2020.  I received a 1099R in 2022 for 1 month of disability income that she received in January of 2021.

The 1099R is in her name with a code of 3 for disability.  The money from January 2021 was deposited into a checking account in which my brother and I as well as my mother were on.   

What do I do in this case?  Her taxes for 2020 have already been filed, not sure how to claim this income?  This is the only income that was received in 2021.  

I was told to report as miscellaneous income with a description of "IRD"

I have done the 'other taxable income' and put in the gross distribution from my deceased mothers' 1099-R.  However, turbo tax doesn't seem to allow me to enter in the federal income tax withheld causing me to overpay in taxes, how am I supposed to determine the income I should owe?

the 1099-R shows:

box 1 of 2767.70

box 2a of 2767.70

box 4 of 233.10      (federal income tax withheld)

box 7 distribution code of 3

If taxes have already been withheld, I would assume I should be able show those taxes have already been paid?

The money went into a checking account that was then split by my brother and I, would we each just claim 1\2 of the money deposited into the checking account?  (2767.7-233.1) = 2534.6 / 2, meaning we each claim an additional 1267.3 in income?

[bosso3]

IF the 1099-R for your deceased mother contains her SSN, then her personal representative (executor) needs to file a Form 1041 Income Tax Return for Estates and Trusts (or at least determine whether or not it needs to be filed.

Information about Form 1041 is available, and a link to this form is  here https://www.irs.gov/forms-pubs/about-form-1041

A worksheet to determine if this form needs to be filed is available here

https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return

Since $233 was withheld in federal taxes, it may be worth filing to get a refund even if filing is not required.

You did not mention which TurboTax product you are using, but you can find out if it supports Form 1041 by using the "Search" option and entering "Form 1041" in the search text box.  Then click the link to jump to form 1041.  The Search option is in the upper right corner of your screen. 

If you TurboTax product does not support Form 1041, it may be cheaper to file by hand.

Don't forget you may need to also file a State return for her.

[hybridtaxguy]

In another thread it was recommended to file it as miscellaneous income and with a description of IRD (income with respect to decedent).  I can also list the withholdings as well.  

Any issue with doing it this way?  Her total income for 2022 (passed in 2021 December) was < 3,000.   Of which, half is claimed by my brother.  

My understanding is upon death, anything after that point is then considered income to the beneficiaries, so not filing taxes for her in 2022.

[DianeW777]

You, you are correct.  Income in any year after the final return belongs to and is reported by the beneficiary. You can easily nominee the income to yourself and your brother, allowing each of you to report half the income and half the federal withholding. Those steps are provided below.  You do not have to delay filing your returns.  I am sorry for your loss.

Filing with the IRD (you could add the last 4 of your deceased mother's SSN if you have it) is the correct approach. 

You can add the federal withholding by using the steps below.

1. Sign into your TurboTax account > once inside the return select Deductions and Credits at the top
2. Scroll to Estimate and Other Taxes Paid > Show More > Start/Revisit beside Income Taxes Paid > Scroll to Other Income Taxes Paid in 2021
3. Continue to Start Withholding not already entered on a W-2 or 1099

This will allow both federal and state additional withholding not entered in any other location.

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. 

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 your mother as the payer and the other owner(s), as the recipient. On Form 1096, list your mother 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 (one for you and one for your brother).

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-R

@hybridtaxguy

[hybridtaxguy]

@DianeW777,

I really appreciate the reply here.  By linking those forms, does that mean I'm not able to file electronically? 

Also, the income was a 1099 for disability income, in which in IL that's not taxed.  From what I read, the income should be taxes as if the decedent were alive meaning my brother and I shouldn't pay state tax on the income.  I have looked long and hard to how to tell TurboTax that we should not be paying the 5% IL state tax on this income.  Do you know how I should proceed there?

Many thanks!

[ThomasM125]

You can still file your tax return electronically. 

To exclude the income from your Illinois tax return, it would be best to prepare your federal return and file it. Then, remove the income not taxable in Illinois from your federal return and mail your state return in with an statement attached explaining why the income was not listed on the tax return.

[hybridtaxguy]

Can I still file the state electronically after I file the federal return and then remove the income?

Do I need to provide the explanation somewhere still?

I really appreciate your help!

[hybridtaxguy]

@DianeW777, @ThomasM125 , is there a way to provide this explanation electronically through TT? 

[AmyC]

Back up. You have two options.

One:

Once you file the 1099s from your mother to you and your brother, the IRS is fully aware and there is no other explanation needed. Maybe you are not understanding the  1099 part. Dianne gave you the links because you have to fill out the 1099 forms showing your mother as the payor while you and your brother received the income from her. You will each then have a 1099-R to report on your taxes as income from your mother, from her name and social. The form she received will be ignored and not used other than as a reference. 

Example:

• 1099-R from Fidelity to your Mom $3,000, tucked in her tax papers.
• Now, you fill out a new 1099-R form to each.
• 1099-R from Mom to first child $1500 - filed on return
• 1099-R from Mom to second child $1500 - filed on return.
• I would also split the tax paid, as the beneficiary, you would be eligible to receive it.

The 1099-R forms are filed with the 1096 Dianne showed above. Here is the form and instructions for filling it out, About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans. 

Two:

Alternatively, instead of going through all of the above, you can just file a 1041 and get a refund for your mom's 1099-R. Here are forms and instructions  About Form 1041, U.S. Income Tax Return for Estates and Trusts. Personally, I think this is easier but you do whichever is best for you.

[hybridtaxguy]

@AmyC,

It sounds like I need the business edition to do the 1041? I only have premier.  I'd really prefer to file electronically, as taxes I filed for 2020 still haven't been processed because of the backlog.

If I need to mail it.  There was no estate created for my mom, everything had beneficiaries.  Would this have required me to go through the court process to get an estate created?  Her home was in trust, also with beneficiaries.  After reading some it sounds like I can apply for this now and for box C write applied for?

eg - 

Name of Estate or Trust - Mothers name, and nothing else?

Name and title of fiduciary - My name and son?

Address - my address?

For checking applicable boxes, I already filed her return for 2020 (with everything i had for 2020), I just have this 1099-R and a small amount from a 1099-DIV for my mom that I received in 2022 for tax year 2021 (received this income in jan 2021), so this would be her final return, or initial return for 2021?

Would we end up paying less in tax for this income by doing the 1041? Rather than my brother and I each claiming our half the income, assuming we're in greater than 24% brackets?

Appreciate your replies here, sorry I have a lot of unique tax situations after my mom passed and trying to do it as correct as possible.

[hybridtaxguy]

@AmyC, @ThomasM125, @DianeW777  (thank you for reading + responding!)

Want to check my understanding here - stepping back a bit

My mom passed in 2020, I filed her taxes as a normal 1040, I noted she was deceased, etc.  Should I have filed a 1041 instead at that point, would that have effected taxes owed?

---changing topics back to the original thread---

After filling out the 1041, it looks like I'm getting the 233.10 withholding back form the 1099-R

There's a question about did the estate make any distributions to its beneficiaries in 2021?

Distribution to Beneficiaries

Distributions to beneficiaries is the dispersal of income earned during the year from investments or other sources. Distributions can also be made from the original assets or principal left by the decedent or maker of the trust.

In all cases, distributions are made according to the instructions specified in the trust agreement or decedent's will.

The money from the 1099-R was deposited into a checking account that both I, my brother and my mom were on.  Is this considered a distribution to beneficiaries?  If it is, my brother and I get a K-1 and it's income regardless.  Wouldn't we be better off just claiming it as misc income and give a description of IRD, seems pointless to create the estate?

Say there was $50,000 in her checking account at the time of death in December of 2020, the day my mom passed, would that have been considered a distribution to the beneficiaries?  Or no, because were already joint holders in the account and just inherited it?

Turbo tax also asks for distributions in 2021, of which only we only received the 2767.70 from the 1099-R in 2021.

[Hymnal]

I have a similar problem, but half of the amount reported on 1099-R was received by my father prior to his death, so half is taxable to his Estate.  I've prepared a 1099 from him to the Estate for the half that was paid after his death and will be reported on the Estate tax return, but how do I report the pre-death portion on my father's personal tax return?  If I follow the TT instructions and enter the information exactly as it appears on the 1099-R, we would end up overpaying unless we can subtract the half of this income being transferred to the Estate somehow.  Do I report in Box 1 half the amount shown on the 1099-R?  Or do I report the full amount in Box 1 and subtract the portion that the Estate will pay tax on somewhere else in his personal return?  If so, where?  

Thanks in advance!  

[MaryAnn211]

I have a situation where I need to split the amounts on a 1099-R between my deceased mother's SSN and the Trust EIN. I understand I can enter a negative amount in other income on her return and issue a 1099-R to the Trust for that amount. There is an amount in box 1 and box 2a, do I only adjust for the amount in box 2a? Also, could you tell me how to make an adjustment for the federal and state withholding? I tried to enter a negative amount in the "withholding not already entered on a w-2 or 1099 but it would not allow a negative number.

Thanks for your help!

[ThomasM125]

You should split the distribution in box 1 as well as the taxable amount in box 2a. You won't be able to separate the tax withheld though, as it is held by the IRS under you mother's social security number. You will have to have that refunded on her personal tax return.

@MaryAnn211 

[MaryAnn211]

How do I split the amount in Box 1? I made an adjustment on line 21 for 1/2 the taxable amount in box 2, but don't know where to make the adjustment for the distribution amount in box 1.