If an employee dies during the year, you must report the accrued wages, vacation pay and other compensation paid after the date of death. If you made the payment in the same year the employee died, you must withhold social security and Medicare taxes on the payment and report them only as social security and Medicare wages on the employee's W-2 Form to ensure that proper social security and Medicare credit is received. On the W-2 Form, show the payment as social security wages and Medicare wages and tips and the social security and Medicare taxes withheld in boxes 4 and 6; do not show the payment in box 1 of W-2 Form.If you made the payment after the year of death, do not report it on W-2 Form, and do not withhold social security and Medicare taxes. Whether the payment is made in the year of death or after the year of death, you also must report the payment to the estate or beneficiary on Form 1099-MISC. Report the payment in box 3. Enter the name and TIN of the payment recipient on Form 1099-MISC. For example, if the recipient is an individual beneficiary, enter the name and social security number of the individual; if the recipient is the estate, enter the name and employer identification number of the estate. The general backup withholding rules apply to this payment. Death benefits from nonqualified deferred compensation plans or section 457 plans paid to the estate or beneficiary of a deceased employee are reportable on Form 1099-MISC. Do not report these death benefits on Form 1099-R. However, if the benefits are from a qualified plan, report them on Form 1099-R.
Last modified 26 Jul 2017 16:07 EST