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My husband died in 2009 and his employer gave me a severance

My husband died in 2009...
My husband died in 2009 and his employer gave me a "severance" each month to help me financially. I received a 1099-MISC (Box 7) for the amount he paid me. What principal business code would I use since I was not a business or a contract employee?
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Answered in 6 minutes by:
2/1/2010
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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HelloCustomer

 

The employer has incorrectly categorized this payment. The payments made to you should have been reported in box 3 as "other income". You will need to call the employer to get a corrected form. Income taxes will be due on the amount you received, but if the amount is left in box 7, you would also end up owing SS and Medicare taxes on these payments, which is not correct.

 

Refer to the instructions for the Form 1099-MISC on page 2, under the paragraph entitled "Deceased Employee Wages". You will see in those instructions where it specifically states that the payments should be reported in box 3 and not in box 7.

 

http://www.irs.gov/pub/irs-pdf/i1099msc.pdf

 

You may want to give this reference to the employer when you request that a corrected form be issued.

 

If this was helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank youCustomer/p>

 

 

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Customer reply replied 7 years ago
The money was after my husband's death and was paid to me under my social security number. Would this still be reported under box 3 since I was not employed by the company?

Hello againCustomer

 

The employer should not have made the payments in this manner. For the year 2009 he should have continued reporting the wages under your husband's SS number and he should have withheld the proper amount of SS and Medicare taxes under your husband's SS number.

 

If the employer did not treat the payments in this manner, then basically he has given you a gift, and gifts are not reportable at all, and they are not deductible by the employer. And of course he is going to want to take a business deduction for the payments that were made, which is why I am sure he is reporting this to you in box 7 as non employee compensation.

 

Unless you want to insist that the employer go back and recategorize all of the payments the way they should have been handled in the first place, you will have no choice but to report this as self employment income and pay the SS and Medicare taxes which are due.

 

If this was helpful please press the Accept button.

 

Thank youCustomer/p>

 

 

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
Merlo and 87 other Tax Specialists are ready to help you
Ask your own question now
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Merlo
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
9,783 Satisfied Customers
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad

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