How do I deal with Bonus from deceased spouse's employer in year I can't count them on my taxes?

Forum|Forum|2 years ago
November 13, 2023
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My spouse died in Fall 2022. I filed my taxes for that year as joint. Then, in 2023, I received an unexpected check for a small annual bonus from their employer. It is my understanding that I cannot file joint on my 2023 taxes because I do not have dependents and am not eligible for SS benefits yet. So, since I can't have them joint, how will I report their income? I use TurboTax, of course.

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Best answer by Opus 17

This is a situation known as "income in respect of a decedent." See IRS publication 559.

https://www.irs.gov/forms-pubs/about-publication-559

https://www.irs.gov/publications/p559#en_US_2022_publink100099595

If there is not an open estate, and if you are your spouse's beneficiary or otherwise the person legally entitled to their property, then you report the income on your tax return in your name. You would file single as normal (or as qualifying surviving spouse** if you have a dependent child). (**This used to be called "qualifying widow" and is still called that on a lot of web sites.)

Note that the employer should issue a 1099-MISC, and not a W-2. Because the bonus was paid in the year after your spouse died, it is not supposed to be subject to medicare or social security tax.

Opus 17Answer

Employee

This is a situation known as "income in respect of a decedent." See IRS publication 559.

https://www.irs.gov/forms-pubs/about-publication-559

https://www.irs.gov/publications/p559#en_US_2022_publink100099595

Note that the employer should issue a 1099-MISC, and not a W-2. Because the bonus was paid in the year after your spouse died, it is not supposed to be subject to medicare or social security tax.

CindyKRAuthor

I am surprised that it won't have SS or medicare tax applied. Good to know about the 1099-Misc! That is helpful. I suspected that is how I would need to handle it, but am very grateful for your expert confirmation and additional information. Thanks so much!

dmertz

Employee

The Form 1099-MISC should have been issued to your spouse's estate, not to you, so you should not have a From 1099-MISC to enter into TurboTax when preparing your individual tax return. If the amount of income to the estate is more than $600 during the estate's income tax year, the estate must file Form 1041 where this income would be included. The estate would then pass this income through to you on Schedule K-1 (Form 1041) which you would include on your tax return for the year that contains the end date of the estate's tax year.