We made a payment to the estate of a deceased employee, paid out of AP. We process these particular payments as 1099-R reportable. We enter payments in box 1 and box 2 of the 1099-R form. Do we also need to enter code (4) in box 7 of the 1099R form?

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What type of payment was it?  Was it final employee wages owed the deceased, or was it a distribution from a retirement plan?

If it was some kind of retirement plan distribution, then 1099-R is the correct form, and you do need to enter the appropriate code in box 7.

However, if the payment was for wages, reporting involves the W-2 as well as a 1099-MISC to the estate if payment is in the year of the death; if the payment is made to the estate in the year after the death, payment should be reported on 1099-MISC, box 3. See Instructions for Form 1099-MISC, page 3, “Deceased employee’s wages.”

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