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Filing taxes for estate: 1041? K-1?
Old 02-12-2014, 12:20 PM   #1
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Filing taxes for estate: 1041? K-1?

My mother in law died 3 years ago. She was in her late 70's. My sister in law is the POA. We were contacted by a former employer that she had a small pension $5500 and they sent my SIL a check minus 20% federal taxes.

My SIL cashed the check and gave half the money to my wife.

Now my SIL has a 1099-R saying the $5500 was a normal distribution.

I'm not sure how to file this. Seems like I should use a 1041 and file for the estate. However, schedule G to figure out the tax seems high: (15% for the first $2450 and 25% after that). We also have to file state taxes, which they witheld nothing..

Can my SIL make out a K-1 and my wife and I file half on our taxes and my SIL files half on her taxes?

Any help is appreciated.
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Old 02-12-2014, 04:20 PM   #2
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Is the 1099-R issued to your SIL as the payee? What payee ID number was used? If so, there is no need to use a 1041. It should be reported on her 1040 return. The easiest way would be for her to report the full amount and you reimburse her for half the additional taxes she incurred. She would claim the withholding as a credit on her tax. Quite likely she owes you money because the withholding may exceed the actual increased tax liability.
Bruce
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Old 02-12-2014, 05:35 PM   #3
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No, it's made out to "the estate of Jane Doe"
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Old 02-12-2014, 05:40 PM   #4
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If the payee on a 1099 is wrong you can give the IRS the correct info via the nominee process described at this link.

http://www.dummies.com/how-to/conten...MMIES2_CONTENT
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Old 02-12-2014, 06:43 PM   #5
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Originally Posted by halv45 View Post

Can my SIL make out a K-1 and my wife and I file half on our taxes and my SIL files half on her taxes?
Might depend on what the estate documents allow..........if they allow the executor to distribute to the beneficiaries or keep in the estate, it can be beneficial to do either depending on the conditions. If the amounts are small and the small estate tax brackets don't kill you, that could be better than distributing if the beneficiaries have a lot of other income. If the amounts are large enough that the estate tax brackets escalate higher than the beneficiaries' tax brackets, then it can be beneficial to distribute.
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Old 02-12-2014, 07:00 PM   #6
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Don't forget that filing a 1041 gets you a $600 exemption, so you are down to 4900. The the tax rate schedule says 15% to 2450 , and 25% to 5700. This assumes an estate was actually opened and a tax number obtained. Did earlier 1041 s have to be filed. After 3 years its likley the estate is otherwise closed.
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Old 02-12-2014, 07:08 PM   #7
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Ok, so I'm learning a lot reading and from you guys/gals.

There was no tax ID created.

She had maybe 100k total with her home, retirement accounts etc. and that was all distributed well over 2 years ago.

I'm just thinking there has to be some way to report this on either one or both of our 1040's.
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Old 02-12-2014, 07:44 PM   #8
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I'm just thinking there has to be some way to report this on either one or both of our 1040's.
Yes, there is, by using the procedure that GrayHare outlined above. There is no need to get into applying for a Tax ID for the estate and filing a 1041.
Bruce
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