Today's Weirdness

[Richcpaman]

I have a taxpayer who is a widower.

Wife worked for Wal-Mart for many years prior to her death.

Seems that WalMart didn't follow the rules about overtime, and 6 years later, Wal Mart sends Wife a settlement check.

But she is dead.  Widower cashes the checks(s).  One for interest on the money, one for the net paycheck.  About $1,500 for each check.

I now have a W-2 with fed and State Withholding, and a 1099-Int, all in the dead spouses name. 

There is not a lot of difference in the tax,  taxpayer is a straight shooter, "If I owe the tax, I will Pay the tax"

Should I just file a single return for the wife on paper, have him sign it as surviving spouse, and get the withholding back?

And file his return like I would have anyway?

Rich

 

[rfassett]

I get concerned when someone is called a "straight shooter" in one sentence but acted fraudulently in a previous sentence (forging a signature to get a check cashed).  The correct way would have been to return the check to Walmart and request it be re-issued either in the estate's name or the widower's name.  However, if I am the widower, and for the amount of money involved, I probably would have done the same thing.  I think I would forget the return for the deceased and just put the income on his return, paper-filing of course, with an explanation of nominee income.

Good luck!

[Richcpaman]

Ron:

He did contact the attorneys handling the case.  Was told to deposit the checks. 

She was still listed on the accounts for that matter, although it has been 4 years.

Rich

[rfassett]

Rich - my apologies!  One would think that at this stage of life, I would know better!

With that new information, I stand by my recommendation but also believe he received bad advice from the attorneys.  Just my 2 cents.

[BHoffman]

[Roberts]

On 2/23/2017 at 11:57 AM, Richcpaman said:

Ron:

He did contact the attorneys handling the case.  Was told to deposit the checks. 

She was still listed on the accounts for that matter, although it has been 4 years.

Rich

Being an investment firm also, we routinely get people who receive checks in the name of their deceased parent as well as spouse. Any bank teller will deposit it if you just write For Deposit Only on the back of the check and fail to mention it. Had an "expert" client who kept telling me the bank refused repeatedly - I asked if he felt the need to mention it to the teller each time - well of course.

Personally, I'd put it on his tax return and make a note of the situation on the return and in your records.

[SaraEA]

The IRS says the income should be taxed to the person who received it, regardless of what SS# it's reported under.  The withholding, though, cannot be passed through to beneficiaries. If he puts it on his personal return the IRS will object because it will have no record that he had that amount withheld.  The deceased person cannot file a tax return, period.  WalMart should issue a new check; their legal dept will choose whether to him or to her estate.  If to the estate, it will have to file a return to receive the refund, he'll have to deposit it into the estate account and then write himself a check.

If the federal and state withholding amounts are small, perhaps he can deposit the check into the joint account, report the income on his personal return,  and just forgo the refunds.

[Richcpaman]

11 hours ago, SaraEA said:

The IRS says the income should be taxed to the person who received it, regardless of what SS# it's reported under.  The withholding, though, cannot be passed through to beneficiaries. If he puts it on his personal return the IRS will object because it will have no record that he had that amount withheld.  The deceased person cannot file a tax return, period.  WalMart should issue a new check; their legal dept will choose whether to him or to her estate.  If to the estate, it will have to file a return to receive the refund, he'll have to deposit it into the estate account and then write himself a check.

If the federal and state withholding amounts are small, perhaps he can deposit the check into the joint account, report the income on his personal return,  and just forgo the refunds.

Of course the IRS wants who ever received the money to pay the tax.  It seems sort of stupid that the Attorneys who brought this case, and who made millions, could not have sent along some paperwork to the person getting the money, i.e. the dead wife, making sure she was still alive, and if not, how to send out the $$ in that case. 

Would have made this a lot easier.  1099-Misc, box 3 for other income for the wages, and 1099-INT for the interest, both to the surviving spouse. 

I can nominee the income to his return, and then paper file a return for her, MFS or single and him as surviving spouse, and hope to get the $250 in withholding between fed and state.

Rich