2022 1099-INT for a closed Estate. What to do?

[ERD50]

I received a 2022 Tax Year 1099-INT for my FIL's Estate, which was completely closed out (Final 1041's filed) when his wife (my MIL) passed in 2019. The “Recipient's TIN” is the EIN of my FIL's trust after he passed. It is for ~ $800 interest, Estate 1041 tax at this level is 10%, so ~ $80 due.

Geez, do I have to file for this small amount? Is it going to be complicated by the fact that the “Final” 1041 was done in 2019?

I'm kind of hoping I'd just get a letter from IRS saying I owe the $80, pay it and be done. But with their backlog, that could be a long time and large penalties. It doesn't seem worth paying for 1041 software, I guess I could paper file? But what about the “Final” status? Or as long as IRS gets something matching the 1099-INT, and a check, that's the end of it? Any way I could just pay it w/o actually filing (they'd figure it out I think)?

Best approach?
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More Background if it matters - In 2019, when settling MIL's estate, I did a search and found unclaimed property on the IL State Treasury site, for a CD of ~ $15K that my FIL lost track of (it hadn't show up yet at the time of his death). He passed about 6 years ahead of my MIL.

I was able to complete the forms and supporting documentation to get those $ into the estate and distributed to the beneficiaries when we settled MIL's estate (she was successor trustee of FIL's trust). I thought I was done.

Then last year, I get a notice that a court determined that IL must pay interest on the property that was held. We got a check for ~ $800 interest. I was a bit concerned about how to cash it, since it had FIL's EIN on it. Well, Fidelity never closed his old account, and it was still set up to transfer to my DW's Fidelity account (which we used to distribute $ to beneficiaries). So I mobile deposited to that old account, waited a few months, then transferred it to DW's account. We hadn't distributed that to the beneficiaries, as we wanted to wait to make sure it didn't get clawed back somehow.

-ERD50

 

[Walt34]

Just ignore it. By the time they get around to actually doing anything about it, you'll be dead.

 

[Sunset]

How annoying.
I think if I wanted to play it safe, I'd pay the tax using the proper tax payer id for it, and not file a return. That way if they ever decide there are taxes on it. There should be no penalty as the taxes were paid.
Keep a receipt.

 

[Montecfo]

I would wait for a notice. You are minimally over the $600 threshold of filing requirement.

But you could compute the tax and send them a check for the $80. That will stop any penalty/interest.

Or just go ahead and file, pretty simple.

 

[ducky911]

I'm in the same boat(final tax return filed last year) I got a 1099 for 3600 dollars. I googled if I have to do a tax return and it was below the amount. I bet with all the credits and allowances it would be a negative amount if I tried.
Funny i was about to post this but you beat me...thanks

from google
When seniors must file. For tax year 2022, unmarried seniors will typically need to file a return if: you are at least 65 years of age, and. your gross income is $14,700 or more.

 

[socca]

Geez, do I have to file for this small amount? Is it going to be complicated by the fact that the “Final” 1041 was done in 2019?

Yes, you do (unless you want to have an unpleasant conversation with an IRS computer). If this were on my plate, I'd mail in an "extension to file" request along with a check for $80. Then, this summer, I'd use my favorite accounting firm to prepare the 1041. This is a pitifully simple tax return but I've never done a 1041 myself and I don't want to learn. Doing a 1065 each year is enough hassle for me.

Anecdotally, I've heard that filing a succession of "final" returns isn't a big deal. The IRS computer won't complain. I'm not exactly sure what effect the "final" checkbox has on IRS algorithms.

Good luck!

 

[38Chevy454]

I had a kind of similar issue. Received a $1000 check for parent's estate after several years from the final trust return. Due to overpaid fees that mortgage company found on audit. I had trouble even depositing the check since accounts were closed. Had to open new account, deposit it and then distribute. Back to the taxes and filing a return. Still had the EIN of course. So just filed a return with $1000 income. Deducted $500 fiduciary fees (hehe) and what was left was below taxable limit. No taxes due or paid.

 

[Retire2023]

I'm facing the same problem, but on a smaller scale. We filed an amended return for my mother after her death, and waited a year and a half before getting the refund which included a little over $300 in interest. Her estate is also closed. It is under her tax ID. Since it is less than $600, do I still need to file?

 

[pb4uski]

Two possibilities.

Make an $80 estimated payment on behalf of the trust using their tax if so that should stop the interest and wait for them to catch up with you.

Alternatively, get the 1041 forms in PDF off the IRS website, do a return, print it out and mail it in with a check.

 

[Texas Proud]

OR....


you can claim it on your return and say it was distributed to you....


I still get a 1099 on my father's estate and he died in 1980... it is a small amount and a gas lease, but to do all the work to get it into anybody's name is not worth it... (like $100 a year)..


I asked all of my siblngs who wanted it and nobody did...

 

[ERD50]

Thanks for the replies so far.

While I like the idea of just sending a check with the EIN (avoids the hassle of actually filing), or making the estimated payment to stop any penalty, or just claiming it on my return, but I dread the idea of things not syncing up at the IRS, and getting a letter.


From 2019, there was a typo on one of their Final 1041's, tax due was ~ $120, IRS cashed the check, but they didn't sync the check with that 1041. It took hours with them over a few calls, and many, many attempts and many, many hours on hold the get through to get this typo corrected. In the mean time, I'm getting letters that they are going to start freezing my accounts or something (answer the phone!). Filing does seem the safest (with no typos!), so I'll try doing that on paper.

Or maybe one of those "crazy" people on the "I enjoy doing my Taxes" thread will do it for me? I won't charge them much for the enjoyment!

-ERD50

 

[ERD50]

I just realized I left out a detail that may or may not be important.

I mentioned that the 1099-INT lists my FIL's EIN (last 4 digits anyway) as the "RECIPIENT'S TIN", but I didn't mention that for "RECIPIENT'S name", it has my name and address.

This makes sense, since I was the one (as co-executor for FIL's estate) to apply to the IL Treasurer to claim the abandoned property. So that's the name/address that IL had on record.

Does that make it easier to claim on my 1040? I'd pay a higher rate (12%, maybe 22% if my estimates for Roth conversion pushed me into that bracket), but I'd rather pay that than do more paperwork.

Hmmmm, I'll have to see if Tax Act handles this, or will it choke on a different TIN on this 1099-INT?

Oh yeah, I need to check all this for IL too! Arghhhh!

-ERD50

 

[Montecfo]

I just realized I left out a detail that may or may not be important.

I mentioned that the 1099-INT lists my FIL's EIN (last 4 digits anyway) as the "RECIPIENT'S TIN", but I didn't mention that for "RECIPIENT'S name", it has my name and address.

This makes sense, since I was the one (as co-executor for FIL's estate) to apply to the IL Treasurer to claim the abandoned property. So that's the name/address that IL had on record.

Does that make it easier to claim on my 1040? I'd pay a higher rate (12%, maybe 22% if my estimates for Roth conversion pushed me into that bracket), but I'd rather pay that than do more paperwork.

Hmmmm, I'll have to see if Tax Act handles this, or will it choke on a different TIN on this 1099-INT?

Oh yeah, I need to check all this for IL too! Arghhhh!

-ERD50

In that case you might still get the notice, but you will have a response. Might fly but IRS can be impervious to logic.

Or is your position the TIN is actually wrong?

 

[SecondCor521]

I just realized I left out a detail that may or may not be important.

I mentioned that the 1099-INT lists my FIL's EIN (last 4 digits anyway) as the "RECIPIENT'S TIN", but I didn't mention that for "RECIPIENT'S name", it has my name and address.

This makes sense, since I was the one (as co-executor for FIL's estate) to apply to the IL Treasurer to claim the abandoned property. So that's the name/address that IL had on record.

Does that make it easier to claim on my 1040? I'd pay a higher rate (12%, maybe 22% if my estimates for Roth conversion pushed me into that bracket), but I'd rather pay that than do more paperwork.

Hmmmm, I'll have to see if Tax Act handles this, or will it choke on a different TIN on this 1099-INT?

Oh yeah, I need to check all this for IL too! Arghhhh!

-ERD50

No, do not claim it on your 1040. The IRS computers pay particular attention to matching TINs, EINs, SSNs, and dollar figures.

If I were in your shoes, I would charge your father's estate $200 to print out a paper copy of a 2022 1041 and fill in the following:

1 interest income $800
14 attorney, accountant, and preparer fees $200
21 exemption $600
23 taxable income $0

Plus all applicable subtotal lines and the rest of the return.

I'd then check to convince myself that the above is permissible based on the 1041 instructions.

I'd then file the return by mail with zero payment to the IRS. I'd also probably check the final box on this 1041 as well. Make copies and file those with your dad's estate paperwork.

And yeah, check your state's filing requirements for their equivalent form. In my state I think it follows the federal rules pretty closely, so a state return would probably be required but no state tax due.

Then actually distribute the $200 to yourself for preparing the return, and distribute the remaining $600 according to the terms of your Dad's will (equally among you and your siblings or whatever).

 

[SecondCor521]

I'm facing the same problem, but on a smaller scale. We filed an amended return for my mother after her death, and waited a year and a half before getting the refund which included a little over $300 in interest. Her estate is also closed. It is under her tax ID. Since it is less than $600, do I still need to file?

Assuming the exemption amount applicable to her estate is $600 and there is no withholding to get refunded, then no.

 

[ERD50]

No, do not claim it on your 1040. The IRS computers pay particular attention to matching TINs, EINs, SSNs, and dollar figures.

If I were in your shoes, I would charge your father's estate $200 to print out a paper copy of a 2022 1041 and fill in the following:

1 interest income $800
14 attorney, accountant, and preparer fees $200
21 exemption $600
23 taxable income $0

Plus all applicable subtotal lines and the rest of the return.

I'd then check to convince myself that the above is permissible based on the 1041 instructions.
.... .

I don't see any $600 exemption for estates/1041? It looks to me like the 10% rate starts at dollar one?

Aw geez, looking some more, does this mean I have to generate K-1's for this as well?

A pox on Congress for making everything tax-wise so complicated. They are just creating jobs for their lawyer friends, at our expense - this is nuts.

So right now I'm leaning to just paying 10% to Feds with the tax year and TIN on the check (and whatever the IL rate is to IL), but not filing. Assuming the Fed/IL computers match them up, I can't imagine much in the way of fallout for not filing, since it was paid. But I'm a little afraid of that assumption.


-ERD50

 

[pb4uski]

I like the idea of having the person who would get the K-1 report it as miscellaneous income and declare victory. If the IRS ever questions that you can just tell them that the final 1041 had been filed so you decided to just have the person who would have ultimately reported the income report it and hope that they're okay with that.

 

[SecondCor521]

I don't see any $600 exemption for estates/1041? It looks to me like the 10% rate starts at dollar one?

It's similar to the standard deduction for regular people. See the instructions for line 21 exemption on Form 1041 at https://www.irs.gov/pub/irs-pdf/i1041.pdf page 27, right hand column.

The 10% rate starts at the first dollar of taxable income, but you get to subtract $600 off the top first.

Aw geez, looking some more, does this mean I have to generate K-1's for this as well?

If you and the other beneficiaries of your father's estate are OK paying you $200 (or whatever amount of interest over $600 that his estate was paid) and dividing the rest according to his will, then you would not be required to file any K-1s at all.

So right now I'm leaning to just paying 10% to Feds with the tax year and TIN on the check (and whatever the IL rate is to IL), but not filing. Assuming the Fed/IL computers match them up, I can't imagine much in the way of fallout for not filing, since it was paid. But I'm a little afraid of that assumption.

You can of course do as you like. But paying taxes without an accompanying filed tax return will be more confusing to the taxing authorities. They'll probably cash the check, and probably won't care that the estate didn't file the tax return. And I think you're right; if you paid the taxes owed then nothing will probably come of it.

But it's honestly not that much work to print out a 1041, fill it in by hand, and mail it with the check. I think it's a tidier solution.

Also, with my suggested idea, you wouldn't have to pay the $80 (or even $20) in taxes. Plus any state taxes you've calculated and thinking of paying.

 

[ERD50]

It's similar to the standard deduction for regular people. See the instructions for line 21 exemption on Form 1041 at https://www.irs.gov/pub/irs-pdf/i1041.pdf page 27, right hand column.

The 10% rate starts at the first dollar of taxable income, but you get to subtract $600 off the top first. ... .

Thank you - I missed that. So $20 taxes to Feds, IL TBD.

I'll weigh the options. Thanks to all.

PS: I'm surprised cathy63 hasn't popped in - she seems to have the definitive answers for tax procedures!


-ERD50

 

[OldShooter]

Just ignore it. ...

This is what I would do. In the event you get a letter, which the 1099 matching software is likely to generate, I would respond with a nice letter briefly explaining that the estate has been closed and there is no money. No more explanation, no offers to do anything. Just (truthfully) that there is no money. I'd expect that to be the end of it; the IRS understands cost/benefit and the cost to chase a trivial amount of money is just not worth the possible collection amount.

 

[38Chevy454]

No, do not claim it on your 1040. The IRS computers pay particular attention to matching TINs, EINs, SSNs, and dollar figures.

If I were in your shoes, I would charge your father's estate $200 to print out a paper copy of a 2022 1041 and fill in the following:

1 interest income $800
14 attorney, accountant, and preparer fees $200
21 exemption $600
23 taxable income $0

Plus all applicable subtotal lines and the rest of the return.

I'd then check to convince myself that the above is permissible based on the 1041 instructions.

I'd then file the return by mail with zero payment to the IRS. I'd also probably check the final box on this 1041 as well. Make copies and file those with your dad's estate paperwork.

And yeah, check your state's filing requirements for their equivalent form. In my state I think it follows the federal rules pretty closely, so a state return would probably be required but no state tax due.

Then actually distribute the $200 to yourself for preparing the return, and distribute the remaining $600 according to the terms of your Dad's will (equally among you and your siblings or whatever).

That's essentially what I did mentioned previous reply, but you put it in lot more detail. OP does not need to pay any taxes if he structures the return so the income is below the exemption limit. Just file the 1041 and be done.

 

[SecondCor521]

Thank you - I missed that. So $20 taxes to Feds, IL TBD.

I'll weigh the options. Thanks to all.

PS: I'm surprised cathy63 hasn't popped in - she seems to have the definitive answers for tax procedures!


-ERD50

You're welcome.

Now I would suggest you please look at that same document and the instructions for line 14 on page 25, right hand column. You'll find that you can also subtract $200 for the cost of "preparing the fiduciary income tax return". I'm not certain, but I don't think there is any requirement that the tax preparer be a professional, and I don't think there is any rule stating that the executor cannot also be the tax preparer.

I would of course recommend you do your due diligence and don't just fill out the return that way based on my suggestion (although I have filled out 1041s before, and I'm a TaxAide volunteer).

If that works, the estate still likely has a filing requirement, but the federal fiduciary income tax due would be $0 and IL would probably also be $0.

And I agree - I think @cathy63 gives excellent tax advice and probably knowledge superior to mine. I hope she chimes in too, either to concur, clarify, or correct what I've mentioned so far.

HTH.

 

[Act2]

I have a similar issue - the interest coming on the delayed refund for the 2021 final return for my deceased Dad means one more return. If there was not a refund delay, the final return would in fact have been final.

I will let my accountant figure it out.

 

[marko]

I have a similar question:
Mom died in June and today I received her 1099R from her state pension.

I also received a separate 1099R from the same state agency addressed to "the estate of" for $110. I'm assuming this was some resudual payment after her death (?) There's no special notations stating why.

Right now, I've entered it into TT just as a second 1099R and plan to let it go at that unless the collective here has a better idea.

Comments?

Edit: the 1099R sent to "the estate of" has a distribution code of "4" for "death", instead of the usual 7, so I think I'm ok.

 

[cathy63]

Thank you - I missed that. So $20 taxes to Feds, IL TBD.

I'll weigh the options. Thanks to all.

PS: I'm surprised cathy63 hasn't popped in - she seems to have the definitive answers for tax procedures!


-ERD50

I'm reading along, but I've never dealt with this situation and don't have any suggestions beyond what you've already gotten. I do agree with SecondCor521 that sending money to the IRS without a return is probably not the right solution.