Social Security Disability received by deceased person

[NECPA in NEBRASKA]

Lump sum social security disability for 08 and 09 was received 13 days after taxpayer died. It wouldn't have been taxable if he had lived, because he didn't have other income. Do I have to report the entire amount as income on the 1041 or part of it? I have read Pub 559 and the 1041 instructions and don't see anything, except that income is treated as the person was alive. He has minor children (his wife died three years ago) and I don't want to make them pay more taxes than necessary. Thanks!

[Terry D EA]

I might be missing something here but shouldn't this be included on the deceased's individual income tax return? I beleive the 1041 is asking for income the "Estate" earned after death. Any income earned after death is income to the estate and not the individual. Sounds like this disability was awarded to him while he was alive. I gues one way to settle it, who was the check written to? Was it written to the individual or to the estate of? I think this would be treated the same as if the deceased was working and his pay check for wages earned while living was issued after death. This would be included on the deceased's final 1040 and not income to the estate.

[kcjenkins]

I would file a 1040 for the dad up to the date of death, and a 1041 for the period after death, with the appropriate K1s for the children. I would show those transactions after the DOD which were reported in dad's SSN on the 1040 and then back them out as 'nominee income' with the estate EIN as the recipient, then reporting them on the 1041. It's better to do it right, now, than to try to skip a step or two now and have it come back to bite you. That always takes more effort than doing it correctly the first time. Plus, the heirs understand paying you to do what has to be done, now, but will not be so happy to pay you for the time to deal with questions later, if those short-cuts cause notices to come later.

[NECPA in NEBRASKA]

Terry, I definitely agree with you. He had no other income while he was alive, so it shouldn't be taxable. They were living off of deceased wife's life insurance. He was finally awarded the SS and then died before he received it. I am showing it as non taxable on both returns. It was received in his SS#. It would end up being taxable on the 1041, because there was a 401K found from his deceased spouse that is now taxable to the estate and would then make the social security taxable. It is a very sad mess. Thanks for your answers.