How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

Trying to understand the SERP as my mother's beneficiary and filing taxes with a 1099

Customer Question

Trying to understand the SERP as my mother's beneficiary and filing taxes with a 1099 Misc Box 7. Also, should I be paying Self-employment tax if I was not employed by the company (again, I'm a beneficiary of the SERP)
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
In general, a SERP is a nonqualified plan funded by the employer to provide key executives with additional retirement income.For federal employment taxation, SERP benefits are subject to Social Security and Medicare taxes -- when the related services are performed or -- when there is no substantial risk of forfeiture When reported to beneficiaries - that income is NOT subject to Social Security and Medicare taxes - and reporting the payment in box 7 is not correct.It must be reported in box 3.You would need to contact the payer and ask for correction.For payments made to your mother while she was alive - you will report on her final tax return (form 1040) - and that will be subject to Social Security and Medicare taxes - but generally all withholding must be done by the payer.
Customer: replied 1 year ago.
Tried to get them to change it. The payer said it was correct. I believe I've filled out the 1040 form correctly on Line 21.
Expert:  Lev replied 1 year ago.
If that form 1099MISC issued in your name or your mother's name?
Customer: replied 1 year ago.
Mine as the beneficiary
Expert:  Lev replied 1 year ago.
Yes - correct - report that income on line 21 - on the dotted line mark it as "inherited SERP"
However if reported in box 7 form 1099MISC - the IRS would generally expect it to be subject to self-employment taxes.
So that reporting is not correct - it should be reported in box 3.
Expert:  Lev replied 1 year ago.
- what to do when your 1099MISC issued incorrectly?
see page 5 in instructions
http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
Let me know if you need any help or further clarification.