How to enter a 1099-R that was issued with SSN of deceased taxpayer, when it should have Estate EIN

[Dave-Mac]

A 1099-R was issued for a distribution taken after my client died in 2017. The distribution code from the IRA was "4-Death"

The gross distribution, taxable distribution, and federal tax withheld should be entered on the Estate's form 1041.

I entered the 1099-R info on the 2017 final 1040.

Then on the next line, I backed out the 1099-R with negative numbers, and entered a note that said that I moved the income to the EIN on the 2017 form 1041.

Is there a better way to handle this?

[TaxPandaCPA]

If you received a Form 1099-R issued with the Social Security Number (SSN) of a deceased taxpayer, but it should have been issued with the Estate's Employer Identification Number (EIN), you'll need to take specific steps to correct the situation:

1. Contact the Issuer
Inform the Payer: Reach out to the issuer of the 1099-R and inform them of the error. They may be able to correct the form and reissue it under the Estate’s EIN.
Request a Corrected 1099-R: Ask the payer to issue a corrected Form 1099-R using the Estate’s EIN. This correction should be reflected in their records as well.
with the Correction Box checked.

2. Reporting the Income on the Estate's Tax Return
Form 1041 (U.S. Income Tax Return for Estates and Trusts): If the 1099-R cannot be reissued, report the income on Form 1041. You will need to include the original 1099-R issued under the SSN as part of the estate's tax return.
Attach a Statement: Attach a statement to Form 1041 explaining the situation. Include the deceased taxpayer's SSN, the amount reported on the incorrect 1099-R, and note that this income is being reported on the estate's return under its EIN.

3. Correcting Information with the IRS
File Form 4852 (Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.): If the payer cannot correct the form, you may file Form 4852 to correct the information on your return. This form allows you to report the correct details and provides an explanation of why you are using the substitute form.

4. Keep Documentation
Recordkeeping: Keep all correspondence with the payer and any documentation showing the steps you took to correct the issue. This will be important if the IRS has any questions about the discrepancy.

Hope this helps! Best of luck!

[BobKamman]

I'm not sure Form 4852 can be used to report zero income when an actual amount has been reported on a 1099.  At best, an IRS clerk might figure the two should be added together, so two documents, one with something and another with nothing, would still require the something to be reported. 

I suspect that if this is a question about a 2017 return, your solution didn't work and you're asking what might have now that IRS has sent a notice.  Sometimes I think Chairman Mao had the right idea, sending the intelligentsia to re-education camps.  Tax practitioners need to be taught again that we have a tax on income, not pieces of paper; and that two wrongs don't make a right, so that it's not a good idea to report fake income and then subtract a fake deduction.  

But then, I'm just a voice in the wilderness.  Those who want to play "Trick the Computer" will continue to enjoy the game.  The IRS answer would be to file a 1099-R for the nominee distribution to the estate.  My answer would be to attach an explanation to the 1040, explaining why the 1099 amount was not reported, and tell the client to call back next year if they get an IRS notice and we'll send them another copy of the attachment.  

[Dave-Mac]

Thank you for your time and great advice.

[Dave-Mac]

this was a big help. Thank you for sharing your knowledge.

Dave Mac