Do I Pay Tax on Husband’s Bonus Check Received the Year After He Died?

[Mapmaker]

My husband died in March, 2017, and to say that I am confused about finances would be a great understatement, but I do have one specific question that I hope someone can answer.
My husband received a check in January, 2018, for $7k which was a prorated amount of his yearly bonus. I am 67 years old and not a qualifying widow. The check was in his name, but I deposited it in our joint checking account. I’m assuming that his company will send a 1099, but I haven’t received it yet. If I file as a single person this year, how, or do I have to, pay tax on the bonus? In the past, I’m pretty sure that the company withheld taxes from his bonus. Would that make a difference to my taxes if they did? Or now that I’m thinking about it, did I break the law by cashing the check in the first place?
TIA.

[ralph124cf]

He will probably get a W-2, not a 1099. This is usually how bonuses and profit sharing is handled. You may even get a check next year based on this years bonus.

I just got a (small) profit sharing check in 2019 even though I retired in 2014. Each profit sharing check has been based on the W-2 generated by the previous years profit sharing check.

Ralph

[HueyLD]

I think the employer will report the $7k paid in Box 3 (Other Income) of Form 1099-MISC in the name and SSN of the beneficiary that is most likely the surviving spouse.

[Mapmaker]

That would surely make it simpler. I hope you are correct.

[straws46]

check out IRS Publication 559

[Epsilon Delta]

This is known as "Income In Respect Of A Decedent" or IRD. That may help you search if the IRS pub above does not help. I'd suggest you also check your state tax rules.

[bsteiner]

It's taxable to his estate, except to the extent the estate made distributions to beneficiaries, it will be taxable to the beneficiaries to the extent the estate had income.

[Gill]

As bsteiner has indicated, this is income to the estate. It's not clear from your post whether an estate account has been opened or a tax return filed. If the entire estate was left to you there is no problem caused by your depositing it to your joint account.

I would suggest reporting it in a Form 1041 estate tax return filed for the estate which in turn will cause the distribution to be taxed to you. In other words, you will report the income as coming from the estate rather than the employer.
Gill

[Mapmaker]

Thanks all. I did find this on page 10 of the IRS publication. Note the last sentence.

Wages. The entire amount of wages or other employee compensation earned by the dece- dent but unpaid at the time of death is income in respect of a decedent. The income isn't re- duced by any amounts withheld by the em- ployer. If the income is $600 or more, the em- ployer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement.
Wages paid as income in respect of a dece- dent aren't subject to federal income tax with- holding. However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. These wages aren't included in box 1 of Form W-2.
Wages paid as income in respect of a dece- dent after the year of death generally aren't sub- ject to withholding for any federal taxes.

[Dottie57]

Ok. No withholding but taxes are due.

[Mapmaker]

Yes, that is my understanding, too. I think I just have to account for the bonus on my return as miscellaneous income. I was concerned that I would somehow have to file a separate return for my husband.

[Gill]

Ok. No withholding but taxes are due.

Correct. All the quote indicates is there is no withholding. The income is still taxable.
Gill

[Gill]

Yes, that is my understanding, too. I think I just have to account for the bonus on my return as miscellaneous income. I was concerned that I would somehow have to file a separate return for my husband.

You should file a return for the estate.
Gill

[RudyS]

If somehow this goes onto YOUR return, (or even if it doesn't), you can take the special filing status for a recent widow(er). Better than single.

[Gill]

If somehow this goes onto YOUR return, (or even if it doesn't), you can take the special filing status for a recent widow(er). Better than single.

No, she is no longer eligible as she stated in her original post.
Gill

[Spirit Rider]

He will probably get a W-2, not a 1099. This is usually how bonuses and profit sharing is handled. You may even get a check next year based on this years bonus.

I think the employer will report the $7k paid in Box 3 (Other Income) of Form 1099-MISC in the name and SSN of the beneficiary that is most likely the surviving spouse.

From the Form 1099-MISC Instructions.

"If you made the payment after the year of death, do not report it on Form W-2 and do not withhold social security and Medicare taxes.

Whether the payment is made in the year of death or after the year of death, you also must report the payment to the estate or beneficiary on Form 1099-MISC. Report the payment in box 3."

[RudyS]

If somehow this goes onto YOUR return, (or even if it doesn't), you can take the special filing status for a recent widow(er). Better than single.

No, she is no longer eligible as she stated in her original post.
Gill

OK. Sorry, I skipped that in the original post. Just looked at the year.