Finance

Have finance questions? Ask a financial expert online.

Ask an Expert,
Get an Answer ASAP!

Please explain the income tax treatment and liability

Customer Question
arising from the payout of...
Please explain the income tax treatment and liability arising from the payout of social security benefits covering a person's last complete month of life, which is said to be paid in the month following death. If that payout is effected before the person dies, the amount may remain in the recipient's account. If the person died before the benefit was actually direct deposited, SSA deems the deposit the equivalent of non-negotiable as the person is not alive to transact (equivalent of signing a check) and SSA may (but not always) seek to claw it back (fraud concerns). If the latter happens, the benefit amount can be redirected to the qualified relatives (wife, children, parents) or if none, to the personal representative. What is the tax treatment of such re-issued final soc sec benefits, and is this the equivalent of a IDD from the decedent's 1048 if the payout was after the date of death? If SSA did not claw back an "earned" final soc sec benefit, what's the best pathway SSA and taxwise?
Submitted: 2 years ago.Category: Finance
Show More
Show Less
Ask Your Own Finance Question
Answered in 1 hour by:
2/28/2016
Financial Professional: Megan C, Certified Public Accountant (CPA) replied 2 years ago
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,609
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

Thank you for your question --

If the social security recipient was not alive on the last day of the month, they do not get a benefit the following month. Social security usually does claw it back, and if it's realized years later then they can ask whoever took the benefit for repayment.

There is a $250 one time death benefit -- and that is not taxable to who receives it. I believe that it is the benefit that you are talking about.

Please let me know if you need anything additional. If not, please rate positive.

Ask Your Own Finance Question
Customer reply replied 2 years ago
Hello Megan. I received your initial response.As follow-up, I will try to clarify the question. Rather than the $255, I am concerned about the social security benefit covering the last full month of life (Dec 2014), paid out in the month of death (Jan 2015), but in this case, not before the recipient had died. At the time, as personal rep, I did speak to two SS help desk people and got conflicting answers. One said return the deposited benefit and use SSA form 1724 to apply for the benefits, which were, indeed, earned (retrospective payment of benefits), and the other said keep the deposit in the account as it was earned. I have done the latter, and now seek the best way to proceed; either a) find a way to return the last month's benefit, file the 1724 requesting the payout be made to the two adult sons, and assuming no income tax consequences to the estate, or b) keep the deposit. Unfortunately, I do not have an SS 1099 for 2015 (due to forwarding and changing addresses), but one of the sons could visit the local SS office to clarify. if the benefit remains with the estate, I would prefer to distribute the final benefit o the two adult sons as IDD (which may affect the AMT calculation for the estate 1041). Are both approaches possible, or do I need to return the benefit amount to SS and apply with the 1724 for reissue. Am I correct that any tax liability would shift to the sons, with no tax liability arising for the estate? thank you.
Financial Professional: Megan C, Certified Public Accountant (CPA) replied 2 years ago

They were confused. The amount that was received for the month prior to the death would not be clawed back - but the payment for the month after they died would be clawed back if they were not notified.

You need to keep the deposit. Don't give it back - it will take FOREVER to get it back.

In this case, the payment is received after death by the estate. It's the estate's income -- and with such a small amount the tax is going to be a relatively small. There's no way to shift this to the sons via social security. If distributed, of course you can handle the passage of the tax attributes in that regard

Thanks

Ask Your Own Finance Question
Customer reply replied 2 years ago
Thank you, ***** ***** agree it would be easier just to keep the deposited final benefit (which is why I didn't force the bank to send the deposited benefit back to SSA at the time); also, there was a notation on the account from Treasury, which I think was effectively a death alert, supposedly to the bank (I guess I need to clarify this) .. However, you mentioned in your earleir response that if SSA realizes the situation at some later date, it could request the return and then the "1724" process would begin. Would it be incorrect to force the bank to return the SS deposit (from funds in the estate account) and then go though the 1724 process? The delay is less of an issue than avoiding loose ends and unnecessary tax liabilities. If the funds end up being re-issued by SS to the sons (please tell me why you mentioned that payout to the sons is not possible), then wouldn't the tax liability be with the sons. I am trying to reduce the 1041 income to the estate, and if I did keep the SS benefit in the estate, I would plan to declare the SS benefit as IRD income on the 1041 and then shift it out with the IDD process. ??
Financial Professional: Megan C, Certified Public Accountant (CPA) replied 2 years ago

If the funds were returned to social security, of course they would issue to the sons or the estate. However, it is unnecessary to do that. And just use the IDD process -- should be easier.

Please let me know if you need anything additional. If not, please rate positive.

Ask Your Own Finance Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a financial professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Megan C Your Own Question
Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,609
16,609 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Megan C is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Rakhi Vasavada

Rakhi Vasavada

Financial and Legal Consultant

2,609 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Megan C

Certified Public Accountant (CPA)

16,609 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Manal Elkhoshkhany

Tutor

1,933 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
A legal undertaking given to me by a Golf Club, a registered
A legal undertaking given to me by a Golf Club, a registered Limited Company, for a deposit made when taking up membership states this is to be uplifted (increased) by the RPI and payable on resignati… read more
Alex J.
Alex J.
Commercial/Corporate
LLB
1,854 satisfied customers
I have an endowment policy that matured and I need to
I have an endowment policy that matured and I need to declare this year. How would I report it? On the tax free comment on the policy below, taxes are actually paid each year of the policy by the issu… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
In 1990 my grandmother created a trust. She at that time put
In 1990 my grandmother created a trust. She at that time put her home in the trust. My father and her sister, (no other siblings) were the original partners in the trust. My father died and then my mo… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
1,753 satisfied customers
I retired on 6/30/2011 and sold my portion of our business
I retired on 6/30/2011 and sold my portion of our business to my remaining partners with a multi year buy out. I started receiving my SSA checks on 7/13. The IRS reported to SSA that I had exceeded my… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a rental that had a house fire in December of 2014.
Hi. I have a rental that had a house fire in December of 2014. It is still being rebuilt. Therefore it was not rented last year. My insurance paid an equivalent to loss of rental income. Do I report t… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
My Mother has been on medicaid years now and just received
my Mother has been on medicaid for 4 years now and just received word of a $20,000.00 Ira account left by my Dad. What should she do?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
My breast cancer has recently progressed to stage 4
My breast cancer has recently progressed to stage 4 terminal. I have not been able to work for about a year and a half. I have received no income other than 6 months STD I had paid for while working. … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I am considering filing. I have about 80K in debt that was
Hello, I am considering filing for bankruptcy. I have about 80K in debt that was from a short-sell in 2009 - it was the 2nd on my home and was a HELOC (home equity line of credit). I also have about 1… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
The deed of our father's house was put in 4 siblings name in1991
The deed of our father's house was put in 4 siblings name in1991 we sold the house in May 2014 what percentage do each of us have to pay this year for selling our family home?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
MOM IS IN A NURSING HOME ABOUT TO GO ON MEDICAID.HER INCOME
MOM IS IN A NURSING HOME ABOUT TO GO ON MEDICAID.HER INCOME IS LESS THAN $1400/MO. AND ONLY ASSETS ARE $2500.00 CHECKING AND $3000 CASH VALUE IN LIFE INSURANCE. CAN SHE KEEP THE INSURANCE.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What are the commission structures on the average for loan
What are the commission structures on the average for loan officers that give comercial loans?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Trying to qualify my mother for Medicaid/nursing home expense.
Trying to qualify my mother for Medicaid/nursing home expense. She has a$12k IRA that I'm told she has to cash out (and be penalized approx. 2 months qualifying time) that otherwise it had to have bee… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a friend whos husband died in November of 2012 that
I have a friend who's husband died in November of 2012 that is looking at filing an estate return with the estate valued at approximately 4 million to 4.5 million. My understanding is that since her h… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I need guidance on setting up an entity, like an investment
I need guidance on setting up an entity, like an investment holding company, to protect US domiciled assets from US estate taxes. I reside in Canada and am not a citizen of the US. The expert should b… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
A third party without an insurable interest in me receives
A third party without an insurable interest in me receives a share of my retirement annuity of $520 a month which, upon my death, jumps to $1147 a month. Are Insurance companies allowed to write such … read more
PDtax
PDtax
Owner
Master's Degree
1 satisfied customers
I am the executrix for my uncles estate and need to determine
I am the executrix for my uncle's estate and need to determine his federal income tax filing status for 2011. He passed away in on June 26, 2011. At the time of his death he would have been eligible t… read more
R. Klein, EA
R. Klein, EA
Accountant
Master's Degree
480 satisfied customers
My father passed away recently leaving credit card debt on
My father passed away recently leaving credit card debt on cards that are solely in his name or ones that my Mom was only a authorized user on the account. I read the answer posted here to the questio… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
ACC483 Income Tax Accounting CHAPTER 1 1. Answer _____________
ACC483 Income Tax Accounting CHAPTER 1 1. Answer _____________ Arthur pays tax of $3,000 on taxable income of $30,000 while taxpayer Barbara pays tax of $6,000 on $60,000. The tax is a a. progressive … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x