Jump to content

Report distribution to a beneficiary on 1099-R?


Guest Hadden2001

Recommended Posts

Guest Hadden2001

Participant in a nonqualified deferred compensation died and the individual's benefit is about to be paid to the participant's beneficiary. Am I correct in assuming that this payment is reported on 1099-R?

Link to comment
Share on other sites

1099-R is definitely not correct.

Check the W-2 instructions and maybe also the 1099-MISC instructions. While ordinarily everything would be reported on a W-2 and subject to all tax withholdings (except FICA and Medicare if the deferred comp. was properly taxed when vested), there are some special rules in a death situation.

Link to comment
Share on other sites

Guest Harry O

Is the payment to the beneficiary being made in the same year as the employee's death? Was the deceased employee actively employed at the time of his death?

Link to comment
Share on other sites

Guest Hadden2001

jpod, I suggest you read the 1099-R instructions, which state "Report distribution to plan participants from nonqualified deferred compensation plans on Form W-2, not on Form 1099-R. However, report distributions to beneficiaries of deceased employees and distributions . . . on Form 1099-R. See box 1 on page R-5 and box 2a on page R-6." So, how could it definitely not be right to report a distribution to a beneficiary on this form?

The individual was not actively employed at the time of death.

Link to comment
Share on other sites

I stand corrected; sorry! I've seen so many instances in which nonqualified deferred comp. paid to the PARTICIPANT was reported on the 1099-R that I gave you my knee-jerk reaction.

Link to comment
Share on other sites

Guest Hadden2001

No problem, this was my first time dealing with a Beneficiary, so I wasn't 100% certain what was correct. If you read the entire 1099-R Instructions, as I did, I was left with the question as to what the definition of "death benefit" is. Is it talking merely about the benefit that the participant was entitled and would have received. Or, is it talking a death benefit paid by the plan in addition to the regular benefit under the plan. I guess it could also be talking about both, too. Or, maybe I just need to have one less cup of coffee. :D

Link to comment
Share on other sites

It still seems odd to me that NQDC paid to a death beneficiary would be reported on the 1099-R, although it seems pretty darn clear that this is what the IRS instructions want to happen. It is strange because NQDC payments are wages, plain and simple (except for the little twist involving of the FICA/Medicare liability), and wages paid to the estate of an employee are reportable on the W-2 and/or 1099-MISC, depending upon the timing of payment in relation to the date of death. Maybe it has something to do with the distinction between payment owed to and paid to a designated or default beneficiary vs. payment owed to an employee and received by the estate after his or her death. But, what if the beneficiary of the deferred comp. was the employee's estate?!?

Link to comment
Share on other sites

  • 1 year later...

I just read the 1099-R/W-2/1099MISC instructions and agree that the death proceeds are reported on the 1099R. However, what are the withholding requirements? It looks like the proceeds are exempt from FICA/Medicare if paid after the year that the participant died and vica-versa. However, what about income tax withholding? Is the deathe benefit subject to any mandatory income tax withholding?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...