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1099-NEC and 1099-MISC Deceased Husband

Forum|Forum|4 years ago
February 1, 2022
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My husband died in August 2021. I have received both a 1099-MISC and 1099-NEC from his employer, both have differing amounts on them. When I tried to enter the 1099-NEC, turbo tax is now trying to create a business under my name. This wasn't wages or income from a business, it was husbands final paycheck and vacation pay. Did his employer fill out the form incorrectly? They entered the amount into box 1, nonemployee compensation.

Best answer by KrisD15

Yes

The employer should have issued a 1099-MISC

You should also have received a 2021 W-2 in your mother's name if your mother was paid wages in 2021 and/or tax was withheld.

Yes

The income is taxable income, but what tax and who pays the tax can depend on several factors:

According to the IRS:

", amounts paid to a former employee are subject to social security, Medicare, and FUTA taxes if they would have been paid even if the employment relationship hadn't terminated because of death or disability retirement. For example, a payment to a disabled former employee for unused vacation time would have been made whether or not the employee retired on disability. Therefore, the payment is wages and is subject to social security, Medicare, and FUTA taxes.

Amounts not subject to federal income tax withholding.

The following amounts, whether paid by you or a third party, aren't wages and aren't subject to federal income tax withholding.

Payments after the employee's death. Sick pay paid to the employee's estate or survivor at any time after the employee's death isn't subject to federal income tax withholding, regardless of who pays it.
Payments attributable to employee contributions. Payments, or parts of payments, attributable to employee contributions made to a sick pay plan with after-tax dollars aren't subject to federal income tax withholding."

A 1099-MISC can report many different types of income, which was confusing for the IRS; Therefore, the IRS brought back Form 1099-NEC (Non-Employee Compensation) for reporting ONLY Self-Employed income.

The payroll department will need to correct the 1099-NEC and report a 1099-MISC.

The instructions from PattiF are helpful for those who wish to use Schedule C-EZ rather than Schedule C. It also lets a Taxpayer use a lesser priced TurboTax program, but a 1099-NEC will always produce business income.

I am also sorry for your loss and hope you have many fond memories.

Asking for a corrected form is not the easiest thing to do I'm sure, but it is highly encourages since the IRS always looks for Self-Employment connected to a 1099-NEC and that means Self-Employment tax.

Best to get it corrected now than deal with the IRS later.

Link for more information

@ameanguitar

P

PattiF

The IRS instructions for a deceased employee's accrued vacation pay are to include the amount on a 1099-MISC. The vacation pay should not have been reported on a 1099-NEC, but there is a way to enter the income without creating a business.

Here are the instructions to enter the 1099-NEC without creating a Schedule C business.

Search for 1099-NEC with the magnifying glass
Click on Jump to 1099-NEC link
Click Add a 1099-NEC
Enter the information on the form and follow the prompts
On the page titled Guess what? You can deduct expenses for the example work, choose No I have no expenses to deduct
Follow the prompts on the screen

I am sorry for the loss of your husband.

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K

KatFen5Author

Thank you PattiF, I appreciate you taking the time to answer and your condolences. I was able to get a hold of husbands former employer, and they are sending a corrected 1099-NEC with $0 on it. They explained, because I had previously worked there temporarily to help them get caught up on their titles, that the system automatically generated the 1099-NEC.

P

PattiF

Thanks for letting me know that you will be getting the correct form. That's good.

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A

ameanguitar

So sorry for your loss. My mother passed around the same time and I am in a very similar situation as you, so thanks for your inquiry.

KrisD15Answer

Yes

The employer should have issued a 1099-MISC

You should also have received a 2021 W-2 in your mother's name if your mother was paid wages in 2021 and/or tax was withheld.

Yes

The income is taxable income, but what tax and who pays the tax can depend on several factors:

According to the IRS:

", amounts paid to a former employee are subject to social security, Medicare, and FUTA taxes if they would have been paid even if the employment relationship hadn't terminated because of death or disability retirement. For example, a payment to a disabled former employee for unused vacation time would have been made whether or not the employee retired on disability. Therefore, the payment is wages and is subject to social security, Medicare, and FUTA taxes.

Amounts not subject to federal income tax withholding.

The following amounts, whether paid by you or a third party, aren't wages and aren't subject to federal income tax withholding.

Payments after the employee's death. Sick pay paid to the employee's estate or survivor at any time after the employee's death isn't subject to federal income tax withholding, regardless of who pays it.
Payments attributable to employee contributions. Payments, or parts of payments, attributable to employee contributions made to a sick pay plan with after-tax dollars aren't subject to federal income tax withholding."

A 1099-MISC can report many different types of income, which was confusing for the IRS; Therefore, the IRS brought back Form 1099-NEC (Non-Employee Compensation) for reporting ONLY Self-Employed income.

The payroll department will need to correct the 1099-NEC and report a 1099-MISC.

The instructions from PattiF are helpful for those who wish to use Schedule C-EZ rather than Schedule C. It also lets a Taxpayer use a lesser priced TurboTax program, but a 1099-NEC will always produce business income.

I am also sorry for your loss and hope you have many fond memories.

Asking for a corrected form is not the easiest thing to do I'm sure, but it is highly encourages since the IRS always looks for Self-Employment connected to a 1099-NEC and that means Self-Employment tax.

Best to get it corrected now than deal with the IRS later.

Link for more information

@ameanguitar

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"