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

Posted: Thu Feb 14, 2019 9:18 am
by 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.

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

Posted: Thu Feb 14, 2019 10:14 am
by 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

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

Posted: Thu Feb 14, 2019 11:24 am
by 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.

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

Posted: Thu Feb 14, 2019 11:48 am
by Mapmaker
That would surely make it simpler. I hope you are correct.

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

Posted: Thu Feb 14, 2019 12:51 pm
by straws46
check out IRS Publication 559

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

Posted: Thu Feb 14, 2019 4:57 pm
by 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.

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

Posted: Thu Feb 14, 2019 5:09 pm
by 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.

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

Posted: Thu Feb 14, 2019 5:17 pm
by 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

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

Posted: Thu Feb 14, 2019 5:53 pm
by 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.

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

Posted: Thu Feb 14, 2019 6:15 pm
by Dottie57
Ok. No withholding but taxes are due.

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

Posted: Thu Feb 14, 2019 7:11 pm
by 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.

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

Posted: Thu Feb 14, 2019 7:27 pm
by Gill
Dottie57 wrote: Thu Feb 14, 2019 6:15 pm Ok. No withholding but taxes are due.
Correct. All the quote indicates is there is no withholding. The income is still taxable.
Gill

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

Posted: Thu Feb 14, 2019 7:28 pm
by Gill
Mapmaker wrote: Thu Feb 14, 2019 7:11 pm 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

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

Posted: Thu Feb 14, 2019 9:11 pm
by 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.

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

Posted: Thu Feb 14, 2019 9:14 pm
by Gill
RudyS wrote: Thu Feb 14, 2019 9:11 pm 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

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

Posted: Thu Feb 14, 2019 10:00 pm
by Spirit Rider
ralph124cf wrote: Thu Feb 14, 2019 10:14 am 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.
HueyLD wrote: Thu Feb 14, 2019 11:24 am 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."

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

Posted: Fri Feb 15, 2019 9:49 pm
by RudyS
Gill wrote: Thu Feb 14, 2019 9:14 pm
RudyS wrote: Thu Feb 14, 2019 9:11 pm 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.