SS benefit received for deceased parent

[mrichman333]

OK, this is a first for me.  I have a customer who receives SS and he also got a SSA-1099 under his social for his deceased parent.

 

Do I need to combine the two on his return?   That just doesn't sound correct to me.

[Max W]

The client should contact Social Security and let them know that the parent is deceased.

All payments should have stopped after the parent died and if the client received anything he may have to repay it.

[mrichman333]

The client should contact Social Security and let them know that the parent is deceased.

All payments should have stopped after the parent died and if the client received anything he may have to repay it.

 

To clarify, this is the last payment his mother was entitled to receive but did not receive before her passing.  He filed a "CLAIM FOR AMOUNTS DUE IN THE CASE OF A DECEASED SOCIAL SECURITY RECIPIENT" and received her last payment.  The SSA sent him a SSA-1099 for the amount due his mother with HIS social security number on it.  His SS being on it is what is confusing

 

So he received two SSA-1099's one for his own SS and one showing the amount his mother was due but it has hi SS# on it

 

http://www.socialsecurity.gov/forms/ssa-1724.html

Edited February 20, 2015 by mrichman333

[Pacun]

That money should go to the estate and then given to the beneficiaries, I think.

[Max W]

For the last month's payment, client became the beneficiary of that payment. In other words, it was income to him. That is why it has his SSN on it. Add the amount to his SS payments. 

[easytax]

Agree that funds are your clients. However I do not agree you simply add then to your clients SS payments.  Yes they were SS to his mother but to him they are "income" just as if he had been a beneficiary of a bank account, etc.

 

The net result may work out the same but I do not believe they are SS funds to him.

[mrichman333]

If the money went to a estate account, and he received a check there would be no tax on that money; her estate was WELL below the $5,340,000 filling requirement.   If it was included on the decadents last return there would be no tax because SS was her only income.

But a SSA-1099 was issued with his SS# on it.

[Lion EA]

IRD.  I haven't had one in a long time.  So, brush up on the rules.

[mrichman333]

For the last month's payment, client became the beneficiary of that payment. In other words, it was income to him. That is why it has his SSN on it. Add the amount to his SS payments. 

 

I disagree to it being income, it is part of his inheritance.

[Lion EA]

He didn't inherit it.  It was income, should've been to the decedent, so is to the recipient.  IRD.

[mrichman333]

Agree that funds are your clients. However I do not agree you simply add then to your clients SS payments.  Yes they were SS to his mother but to him they are "income" just as if he had been a beneficiary of a bank account, etc.

 

The net result may work out the same but I do not believe they are SS funds to him.

 

Not income, but  Inheritance; if the money went to the estate the estate would not have to file a return because it was well below the filling requirement and hence no tax, and in NJ there is no tax on parent to child inheritance.

So why should he have to include a inheritance as income?

[mrichman333]

He didn't inherit it.  It was income, should've been to the decedent, so is to the recipient.  IRD.

How is it income and not inheritance?  If his mother died a week later the money would have been in her bank account and he would have inherited it, so what's the difference?  And why not a 1099-MISC why a SSA-1099

[jklcpa]

How is it income and not inheritance?  If his mother died a week later the money would have been in her bank account and he would have inherited it, so what's the difference?  And why not a 1099-MISC why a SSA-1099

 

Income because the SSA has a specific order it pays the funds out, and it paid directly to the son and not the estate.  The order of payment is included in the link you provided to SSA's form 1724.  The son filled out that form and he must have indicated that he had the right to receive it, if he didn't and if it should have been included in the estate to be distributed to all beneficiaries, then he should have filled out the 1724 for the payment to be paid to the estate.

 

Social security benefits are one type of income paid that is IRD.  IRD retains the same character on the recipients return as it would have been reported on the original owner's tax return.  SSA doesn't issue 1099-misc.  Anyway, if the son's income is high enough that 85% of his own SS is being taxed, at least he is getting a break of 15% of the parent's SS not being taxed also.

[mrichman333]

Income because the SSA has a specific order it pays the funds out, and it paid directly to the son and not the estate.  The order of payment is included in the link you provided to SSA's form 1724.  The son filled out that form and he must have indicated that he had the right to receive it, if he didn't and if it should have been included in the estate to be distributed to all beneficiaries, then he should have filled out the 1724 for the payment to be paid to the estate.

 

Social security benefits are one type of income paid that is IRD.  IRD retains the same character on the recipients return as it would have been reported on the original owner's tax return.  SSA doesn't issue 1099-misc.  Anyway, if the son's income is high enough that 85% of his own SS is being taxed, at least he is getting a break of 15% of the parent's SS not being taxed also.

 

OK, I got it now, thank you