FUNDS FROM DECEASED EMPLOYER TO SPOUSE

[Ochumare]

My client (survivor) received a 1099-Misc for $6K to his name.  These "benefit funds" are for accumulated and unused vacation, sick & personal days.  How or where do I report this as is not his EARNED moneys?   Also my understanding is that these funds are not taxable to survivor?   How do I treat this, please help

[Taxes-by-Rocky]

Sounds like 'income in respect of a decedent' received by the beneficiary (as opposed to being received by the decedent's estate).  That would likely make it includable in the income tax return of the recipient in the year of receipt.  Check the IRD rules.

[Ochumare]

Thanks for your reply.  Yes, in fact is considered income in respect of a decedent. 

I am looking for assistance as to how to treat it/where to report it on the 1040.   I already checked the IRD rules but does not specify where/how to report this particular scenario.

My main issue is not knowing how to report it as funds are being reported on a 1099-Misc and is not earned nor taxable income.

[Just-Lisa-Now-]

1099MISC isn't earned income.

Why wouldn't it be taxable income to his estate?  or was it in the surviving spouses SSN?

[Taxes-by-Rocky]

If it has been properly reported on Form 1099-MISC in Box 3 "Other Income" then I suspect it will end up on Form 1040, Schedule 1, Line 8z.

I believe that employee 'earnings' paid in tax year after death are not subject to FICA (i.e., not earned) but Schedule C business earnings would be.  Check Publication 15 and 15-A, p. 45.

[sjrcpa]

@Ochumare "how to report it as funds are being reported on a 1099-Misc and is not earned nor taxable income"

It is not earned income (for SS/SE purposes) but it is taxable income. Most likely that 1099 is issued in the spouse's SSN.