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Hi thanks for helping me again. If this is Lane you were very helpful with my taxes.My mother passed away 07/27/2016. I filed her 2016 State (502) & Federal (1040) taxes. On the Federal there was a $2,770.00 refund. On the State $1437.00 was refunded.
On 03/07/17 I mailed the State form 502R, and The Federal form 1041 form both as final returns.
For calendar year 2017 I received a 1099 INT from my mother’s trust bank account in the amount of 703.59. This account was closed in 2017. On the Federal form 1041 line 1 the interest was noted as 704.00.
I also received a form 1099G for 2017 showing an income tax refund of $1,437.00. We did receive this refund which was for estimated taxes & taxes had been withheld from her pension check.
I am not sure what I do now.
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Answered in 15 minutes by:
3/15/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,995
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Who is the payee on the checks?

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Customer reply replied 1 month ago
Good question. The money was deposited into her estate bank account, so it was either in her name or the estate I guess. I signed the returns with my name & personal representative. Does that help?

If it's in the estate account, then you will simply distribute to the beneficiaries under the terms of the will or trust.

...

You've reported the interest on the 1041 as you should. And the 1099-G is only taxable if the taxes were deducted in the previous year.

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Customer reply replied 1 month ago
The estate account is closed & everything has been distributed. My concern with that is the 1099-INT for 2017. Will the government match it up with the 1041?The 1099G amount was deducted in 2016 before she died. This however was 500.00 she paid in estimated taxes & 937.00 that was with held from pensions etc. Would she owe on money she paid?
Money is never owed on a tax refund, unless the state taxes were deducted in the previous year... If they were indeed deducted, then they haven’t been taxed yet.
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Customer reply replied 1 month ago
You are confusing me. By previous year do you mean 2016? $500.00 was money she paid in estimated taxes in 2016. How could that need to be taxed since she paid the state. $937.00 was money in 2016 that was taken out of her pensions. I am not clear on what you are saying.
Customer reply replied 1 month ago
The 937 was withheld from her checks she received. I don't know if that clarifies anything.

Just not sure of another way to say this ... a 1099-G can be for a refund of state taxes that were overpaid.

...

SO lets say that I get (works the same way for an estate or a trust) a 1099-G for tax year 2017.

...

I can ignore the 1099-G if in 2016 I did not itemize and take a deduction for the state taxes on the federal return.

...

But if i DID deduct those taxes in 2016 and they were refunded in 2017 (or some portion of them are being refunded) and I got a 2017 1099-G for them, then that refund is taxable becasue I didn’t really pay that amount in state tax (got it back in a refund) but DID deduct them as an itemized deduction on the 2016 return

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Customer reply replied 1 month ago
On her 2016 form 1040 I did itemize for medical expenses. Does that mean I have to file a return for her in 2017 & would that be both Federal & State?
Customer reply replied 1 month ago
On the 502R form I sent 3/7/2017 line 44 the amount of $1437.00 for the refund was imputed. Does that change anything?

As income?

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All that matters is whether you took, on the 2016 1040, on line 5, an itemized deduction for state taxes (https://www.irs.gov/pub/irs-pdf/f1040sa.pdf).

...

If you did, and then those taxes were refunded by the state, then the 1099-G must be reported as income for 2017.

...

If state taxes were NOT deducted on line 5 of the 2016 1040 and were refunded, the 1099-G is not taxable, because you didn't take a deduction for them in a previous year.

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Customer reply replied 1 month ago
I am not sure what as income means? Are you talking about the 502R? It asks total MD & local tax withheld from 1099 forms & I put 937, and another line 2016 estimated tax payments & I put 500. On line 44 it asks total payments & credits & I put 1437.00 Is that what you are asking?
Customer reply replied 1 month ago
Line 5 asks if you are a qualifying widow. I am trying to figure out what line you meant....
Customer reply replied 1 month ago
I got it, I think you mean line 5 from itemized deductions which I did use. Ok if I owe taxes do I do the 1040 & 502, or since the estate is closed what do I do? It isn't a matter of pay if we owe but I am not sure what forms. I am assuming the interest from the bank has been taken care of with the 1041 where it was declared

I'm talking about the federal return

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Customer reply replied 1 month ago
The Federal return under line 5 of itemized deductions?

Sorry I didn't see your last comment until after I posted.

...

Yes, right

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You'll need to do another 1041 to report the 1099-G, and you're done. A 1041 is required any time that an estate has income over the estate's income tax deduction of $600

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Customer reply replied 1 month ago
Since the from 1099G came from the state of Maryland do I only have to file a state return? And again which form/forms do I use?

See this from IRS:

...

Do you need to file Form 1041 for an estate?

If you’re an executor for an estate, you may need to file form 1041 for the estate if one of these conditions is true:

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No you never pay tax to the taxing authority that gave you the refund ... you need to file the federal return because you deducted these taxes on a previous federal return

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Customer reply replied 1 month ago
Ok so I would do this under the estate number not her SS#, and I assume amended return. Do I have to file an amended 502?

Yes if the income came after the date of death it's always the estate's income. And no, no need to redo anything at the state level here.

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On the amended return question ... If the dollars came back during 2017 (that means the 1099-G will be dated 2017) and you've already DONE a 2017 1041, you'd need to amend.

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Customer reply replied 1 month ago
Ok I think I understand 1041 amended is the only form I need to do. Hopefully it will be simple since I am only claiming the state refund.
Customer reply replied 1 month ago
Am I correct that I don't have to worry about the 1099 INT in the amount of 704 from the bank since that was claimed on the original 1041?

Yep VERY simple ... you'll do it and report that one item of income and that's it. And at this level of income it's likely taxed at a lower rate than if you passed out the income on a k-1.

...

Becasue this is the estate's ONLY income, and if you pass out via the k-1 it would some on top of the beneficiary's income and likely be taxed at a higher rate

...

Well, it would also be on the amended return ... I you amended and it wasn't there you'd be saying it's not taxable. The amended return simply replaces the original return as it should have been ...

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original return reported 704 .... amended return should report the 704 and the state tax refund as well. The amended return replaces the original return.

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Said differently, when you file an amended return, it will be as if the first return never existed. So whatever should have been ON that return (the interest and the taxable state tax refund) is what is reported. The original return simply "goes away."

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Customer reply replied 1 month ago
We do have K-1 for the 1041. It was a credit.
Customer reply replied 1 month ago
I guess I will have to do new K-1's for my sister & me. Hopefully still a credit.
Customer reply replied 1 month ago
I am looking at the 1041. Do you know what line item I put the $1,437.00?

Line 8 where it says "8 Other income. List type and amount." You'll see that there's space to write "taxable state tax refund on for 1099-G."

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Customer reply replied 1 month ago
Great! Do I have to amend form 504 since it takes the amounts from the 1041?

Yes, if you don't you'll get a request. (not the 502, but yes the 504)

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Customer reply replied 1 month ago
Ok I will amend the 1041, 1041 K-1's , 504, & 504 K-1's. Hopefully everything will be done after that.

Yes, that should be it ... The ONLY reason to do another 1041/504 would be if income floats in in a future year for some reason.

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Customer reply replied 1 month ago
Ok, I sure hope nothing else comes in. This is a lot of work but I am happy you have been able to help me.

Glad to be of help ... I would bet that this is it.

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If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars on your screen, and then clicking “submit")

That’s the only way JustAnswer.com will credit me for the work.

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,995
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane
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Category: Tax
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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