How/where report 1099-R income received after death?

[blartboy]

My mom died on 12/17/22. On 12/20 she received a final annuity payment, and on 12/30 a final pension payment, both of which are allowed to be kept.

Since this income was received after death, I think I have to reduce the amount of 1099-R income she received  on her final 1040 return by the amounts of these two payments, and report them on Form 1041 later (I am doing a fiscal year for the 1041).

Where and how do I reduce the 1099-R amounts on her final Form 1040? I understand how to do it for 1099-INT and -DIV from some previous help, but not R.

Thank you.

[ThomasM125]

I'm sorry for your loss. One option would be to enter a negative entry to Other Income to back out the additional income. Another option would be to reduce the income reported on the Form 1099-R entry, then mail the tax return in and attach a statement explaining the adustment to the 1099-R entry.

If there is a state tax return involved, the pension may get a special treatment on that return, so changing the 1099-R entry would be the better choice in that circumstance.

Here's how to make a negative entry to Other Income:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Find Less Common Income in the list of income sources
4. Use the Show More option to expand the choices and choose Miscellaneous Income, 1099-A, 1099-C
5. Choose the Other Reportable Income option and find Other Taxable Income in that section
6. Enter a description for your entry and the amount as a negative number

[blartboy]

Thank you for the help.

The state is Connecticut. If I choose the second option -- reducing the 1099-R amount -- it sounds like I would also attach an explanatory statement to the Connecticut return?

Could you briefly say why the pension might get special treatment? It is a retired teacher's pension; there are no beneficiaries and the account is closed. It's only this single final monthly payment that I need to treat correctly.

Maybe I'd be better off filing for an extension and getting professional help.

Thank you.

[DianeW777 · Accepted solution]

Yes, you would attach a statement to the Connecticut (CT) return as well.  

• CT Rules for Pension, etc: In general, income that is taxable for federal income tax purposes is also subject to Connecticut income tax, including income from wages, pensions, interest, dividends, annuities, capital gains, etc.

Not all states tax pension income which is why, in some cases, it could receive special treatment.  CT does tax it when it is taxable on the federal return.

[blartboy]

Thank you both, 🙂

[fanfare]

I don't see why you have to make any adjustment.

it is better to pay the tax on the individual return, rather than an estate tax return which has higher tax rates.

If you leave it on the individual return, you are finished with those 1099-Rs.

@blartboy 

[fanfare]

an estate tax return, if any, would be for 2023 income exceeding $600.

the 1099-Rs are for 2022.

@blartboy 

[blartboy]

You are right, the 1099-Rs cover the entire year of 2022. But my mom died in the middle of December and the 1099s she received include income received after death.

I guess my layman's understanding is that income received after death belongs to the estate rather than to the individual, and therefore doesn't belong on the individual's 2022 Form 1040 but rather on the estate's Form 1041, which I will file at the end of the estate's fiscal year. I have chosen a fiscal year that starts on the day of death, 12/17/22, and will end on 11/30/23, or the closing of the estate, whichever comes first.

Correct me if I'm wrong, which I may be. That's why I'm considering having a professional do the return.

[RobertB4444]

Having a professional do these kinds of things is always a good idea.  In this case @fanfare is correct - despite the fact that these payments were received after her death they were issued to your mom in the year of her death.  The 1099-R reflects this by including this income as part of what was paid to your mother in the year of her death.  Rather than create a ton of extra work including these payments as taxable to your mother in the year of her death is sensible and - because of the forms that you received - what the IRS expects at this point.

@blartboy