The decedent’s return must be filed by April 15. If additional money is owed, that amount should be paid when taxes are filed. The IRS could impose a lien on the property of the deceased if owed taxes are unpaid. Conversely, if there is a tax refund due, it can be claimed using the Form 1310.
Paying an Employee After Death (Subsequent Year)
What happens when an employee is owed wages in a new year after they are already deceased? When this happens, the payments are not taxable. Payments of this nature are exempt from federal, FICA, and FUTA taxes. These payments should then be recorded on a Form 1099-MISC and reflected in box 3. The 1099-MISC should be made out to the name of the beneficiary or estate. A taxpayer identification number (TIN) number should be used in place of the deceased’s Social Security number.
Separately, death benefits from non-qualified deferred compensation, like a 401(k), are reported on Form 1099-MISC in box 3 when paid to the estate or beneficiary of a deceased employee.
Uncashed Paper Checks
In cases like these, the employer would want to stop payment on the original check. Then, they would reissue the check to the employee’s beneficiary or estate for the same net amount. The reason this reissue remains the same is because income and employment taxes were properly withheld at the time it was created. Those taxes and wages would then still be reflected on the deceased’s Form W-2.
Note that you should check state law before reissuing the check. Your jurisdiction may have requirements pertaining to how much can be paid, and who qualifies as beneficiary.
There are far more important items to focus on when an employee passes. But even in death, the IRS still has to collect its dues. By using the guidance provided above, you’ll have the ability to ensure that any owed funds are properly distributed and that you’re doing right by the dearly departed.
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