Tax Help - After Death Social Security Payment

[cyfairslam]

My wife received a portion of her mother's last social security payment and was issued a SSA-1099. The amount was around $250.

I don't believe there are any taxes owed on this money as it was actually part of my mother in laws estate and not true income. The money was used to pay a portion of her funeral expenses.

I am using Turbotax and not sure how to report this or whether I should even include it in the return.

Any thoughts:

Thanks

[Silk McCue]

The $255 death benefit is not taxable.

Lump sum payments made under section 203 and 204 (b), Title II of the Social Security Act, (49 Stat.,620) to a deceased employee's estate are not subject to Federal income tax and should not be included in the income tax return filed on behalf of the decedent.

Cheers

[cas]

The $255 death benefit is not taxable.

Yes, but the SSA already accounts for that on the SSA-1099. (Or at least they do on the one I'm dealing with this year, where the $255 death benefit was reported to the decendent's spouse's SS# and appears on the SSA-1099 for the decedent's spouse.) The $255 death benefit is included in the amount "paid by check or direct deposit" in the line item description for Box 3 the SSA-1099, but then (further down line list of line items) subtracted out as "non-taxable payment," so that it doesn't appear in Box 3 or Box 5.

OP? Is the amount on your wife's SSA-1099 exactly $255? And/or do you see a $255 death benefit being subtracted out as "$255 non-taxable payment" in the box on the SSA-1099 that says "Description of amount in Box 3"?

(p.s. Kinda sounds to me like it would be unusual for a married child of the decedent to be eligible for the $255 death benefit anyway. But the ways of the SSA are beyond me. They eventually got to the right numbers for the decedent whose taxes I'm doing, but there sure was a lot of huffing and puffing and direct depositing and direct debiting before things settled down to the right number.)

[cyfairslam]

Thanks for the replies.

No, the amount was $246.35. The payout was not the death benefit but the deceased last payment split 6 ways for each child.

It seems to me that this amount should be to the deceased estate and not subject to federal income taxes. But they did send out a SSA-1099 and I have to deal with it.

[cas]

I was searching through bogleheads on a different subject and happened to come across a post that sounds like it may be related to what you are seeing:

Tax question - Deceased person's final social security payment

It is a confusing topic, so your confusion is understandable.

By the way, it appears that an estate receiving a final SS payment is relatively rare, because SSA claim form designates it as a last resort. Ordinarily an SS payment or Medicare premium refund due to a decedent after death goes to the widow[er] (if any), then the decedent's children (if any), then the decedent's surviving parents (if any). The SSA claim form lists the estate's representative as a last resort, only if there are none of the foregoing.

The claim form requests the SSNs of the surviving widow[er]/children/parents if any of those exist and presumably would have reported the payment under their SSNs. The funds should not have passed through the estate if any of those folks had existed.

I have no knowledge in this area, so take this with a grain of salt, but that makes it sound like it would be normal procedure (if there was no surviving spouse), for an owed-but-unpaid final SS amount to be divided among the kids, SSA-1099s to be issued to the kids SS#s, and the SSA-1099 amount to be taxable on the kids' tax returns.

[HomeStretch]

Edit - It is odd that your spouse’s parent was owed a SS benefit at the time of death that was then paid to the heirs rather than the Estate. Often it is the opposite situation - the Estate needs to repay the SS benefit received in the month of death.

[Silk McCue]

It is odd that your spouse’s parent was owed a SS benefit at the time of death that was then paid to the heirs rather than the Estate. Often it is the opposite situation - the Estate needs to repay the SS benefit received in the month of death.

As I understand it and from the Social Security site, the payment received IN the month of death is earned in the prior month and is retained. Any payment received in the month following the death is not and must be returned.

From SS website.

We can't pay benefits for the month of death. That means if the person died in July, the check received in August (which is payment for July) must be returned. If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death.

Cheers

[HomeStretch]

As I understand it and from the Social Security site…

Thanks, you are correct. I will correct my prior post.

[ktmo]

I am not an expert, but also dealt with this last year. My dad passed away on the first of the month. I let SS know of his passing and they stated that there would be one more SS payment that I would be able to keep. Like you, I thought that it would be considered his and I would put it on his taxes. However, I was issued a SSA-1099 in my name. I used Turbo Tax and it was added in my income, so I did pay taxes on it. Not sure if that is right, but it is what Turbo Tax had me do.