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Ammended Return

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Ammended Return

Ammended return 2. Ammended return   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Ammended return How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Ammended return Deferral percentage. Ammended return Employee compensation. Ammended return Compensation of self-employed individuals. Ammended return Choice not to treat deferrals as compensation. Ammended return Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Ammended return Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Ammended return S. Ammended return Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Ammended return Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Ammended return A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Ammended return SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Ammended return A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Ammended return Eligible employee. Ammended return   An eligible employee is an individual who meets all the following requirements. Ammended return Has reached age 21. Ammended return Has worked for you in at least 3 of the last 5 years. Ammended return Has received at least $550 in compensation from you in 2013. Ammended return This amount remains the same in 2014. Ammended return    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Ammended return Excludable employees. Ammended return   The following employees can be excluded from coverage under a SEP. Ammended return Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Ammended return Nonresident alien employees who have received no U. Ammended return S. Ammended return source wages, salaries, or other personal services compensation from you. Ammended return For more information about nonresident aliens, see Publication 519, U. Ammended return S. Ammended return Tax Guide for Aliens. Ammended return Setting Up a SEP There are three basic steps in setting up a SEP. Ammended return You must execute a formal written agreement to provide benefits to all eligible employees. Ammended return You must give each eligible employee certain information about the SEP. Ammended return A SEP-IRA must be set up by or for each eligible employee. Ammended return Many financial institutions will help you set up a SEP. Ammended return Formal written agreement. Ammended return   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Ammended return You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Ammended return However, see When not to use Form 5305-SEP, below. Ammended return   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Ammended return Keep the original form. Ammended return Do not file it with the IRS. Ammended return Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Ammended return See the Form 5305-SEP instructions for details. Ammended return If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Ammended return When not to use Form 5305-SEP. Ammended return   You cannot use Form 5305-SEP if any of the following apply. Ammended return You currently maintain any other qualified retirement plan other than another SEP. Ammended return You have any eligible employees for whom IRAs have not been set up. Ammended return You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Ammended return You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Ammended return An affiliated service group described in section 414(m). Ammended return A controlled group of corporations described in section 414(b). Ammended return Trades or businesses under common control described in section 414(c). Ammended return You do not pay the cost of the SEP contributions. Ammended return Information you must give to employees. Ammended return   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Ammended return An IRS model SEP is not considered adopted until you give each employee this information. Ammended return Setting up the employee's SEP-IRA. Ammended return   A SEP-IRA must be set up by or for each eligible employee. Ammended return SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Ammended return You send SEP contributions to the financial institution where the SEP-IRA is maintained. Ammended return Deadline for setting up a SEP. Ammended return   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Ammended return Credit for startup costs. Ammended return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Ammended return For more information, see Credit for startup costs under Reminders, earlier. Ammended return How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Ammended return If you are self-employed, you can contribute to your own SEP-IRA. Ammended return Contributions must be in the form of money (cash, check, or money order). Ammended return You cannot contribute property. Ammended return However, participants may be able to transfer or roll over certain property from one retirement plan to another. Ammended return See Publication 590 for more information about rollovers. Ammended return You do not have to make contributions every year. Ammended return But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Ammended return When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Ammended return Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Ammended return A SEP-IRA cannot be a Roth IRA. Ammended return Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Ammended return Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Ammended return If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Ammended return Participants age 70½ or over must take required minimum distributions. Ammended return Time limit for making contributions. Ammended return   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Ammended return Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Ammended return Compensation generally does not include your contributions to the SEP. Ammended return The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Ammended return Example. Ammended return Your employee, Mary Plant, earned $21,000 for 2013. Ammended return The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Ammended return Contributions for yourself. Ammended return   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Ammended return However, special rules apply when figuring your maximum deductible contribution. Ammended return See Deduction Limit for Self-Employed Individuals , later. Ammended return Annual compensation limit. Ammended return   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Ammended return However, $51,000 is the maximum contribution for an eligible employee. Ammended return These limits are $260,000 and $52,000, respectively, in 2014. Ammended return Example. Ammended return Your employee, Susan Green, earned $210,000 for 2013. Ammended return Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Ammended return More than one plan. Ammended return   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Ammended return When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Ammended return Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Ammended return Tax treatment of excess contributions. Ammended return   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Ammended return 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Ammended return $51,000. Ammended return Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Ammended return For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Ammended return Reporting on Form W-2. Ammended return   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Ammended return Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Ammended return If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Ammended return Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Ammended return Your contributions (including any excess contributions carryover). Ammended return 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Ammended return In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Ammended return Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Ammended return When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Ammended return The deduction for the deductible part of your self-employment tax. Ammended return The deduction for contributions to your own SEP-IRA. Ammended return The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Ammended return For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Ammended return To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Ammended return Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Ammended return Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Ammended return However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Ammended return If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Ammended return Excise tax. Ammended return   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Ammended return For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Ammended return When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Ammended return If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Ammended return If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Ammended return Example. Ammended return You are a fiscal year taxpayer whose tax year ends June 30. Ammended return You maintain a SEP on a calendar year basis. Ammended return You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Ammended return Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Ammended return For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Ammended return S. Ammended return Return of Partnership Income; and corporations deduct them on Form 1120, U. Ammended return S. Ammended return Corporation Income Tax Return, or Form 1120S, U. Ammended return S. Ammended return Income Tax Return for an S Corporation. Ammended return Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Ammended return (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Ammended return , you receive from the partnership. Ammended return ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Ammended return Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Ammended return (See the Caution, next. Ammended return ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Ammended return This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Ammended return You are not allowed to set up a SARSEP after 1996. Ammended return However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Ammended return If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Ammended return Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Ammended return At least 50% of your employees eligible to participate choose to make elective deferrals. Ammended return You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Ammended return The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Ammended return SARSEP ADP test. Ammended return   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Ammended return A highly compensated employee is defined in chapter 1. Ammended return Deferral percentage. Ammended return   The deferral percentage for an employee for a year is figured as follows. Ammended return   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Ammended return Employee compensation. Ammended return   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Ammended return Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Ammended return See Compensation in chapter 1. Ammended return Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Ammended return Compensation of self-employed individuals. Ammended return   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Ammended return   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Ammended return Choice not to treat deferrals as compensation. Ammended return   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Ammended return Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Ammended return 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Ammended return $17,500. Ammended return The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Ammended return Cash or deferred arrangement (section 401(k) plan). Ammended return Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Ammended return SIMPLE IRA plan. Ammended return In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Ammended return Catch-up contributions. Ammended return   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Ammended return The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Ammended return Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Ammended return However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Ammended return The catch-up contribution limit. Ammended return The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Ammended return   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Ammended return Overall limit on SEP contributions. Ammended return   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Ammended return The same rule applies to contributions you make to your own SEP-IRA. Ammended return See Contribution Limits , earlier. Ammended return Figuring the elective deferral. Ammended return   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Ammended return Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Ammended return However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Ammended return Excess deferrals. Ammended return   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Ammended return For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Ammended return The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Ammended return See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Ammended return Excess SEP contributions. Ammended return   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Ammended return You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Ammended return If you do not notify them within this time period, you must pay a 10% tax on the excess. Ammended return For an explanation of the notification requirements, see Rev. Ammended return Proc. Ammended return 91-44, 1991-2 C. Ammended return B. Ammended return 733. Ammended return If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Ammended return Reporting on Form W-2. Ammended return   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Ammended return You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Ammended return You must also include them in box 12. Ammended return Mark the “Retirement plan” checkbox in box 13. Ammended return For more information, see the Form W-2 instructions. Ammended return Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Ammended return Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Ammended return Distributions are subject to IRA rules. Ammended return Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Ammended return For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Ammended return Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Ammended return Making excess contributions. Ammended return Making early withdrawals. Ammended return Not making required withdrawals. Ammended return For information about these taxes, see chapter 1 in Publication 590. Ammended return Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Ammended return Prohibited transaction. Ammended return   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Ammended return In that case, the SEP-IRA will no longer qualify as an IRA. Ammended return For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Ammended return Effects on employee. Ammended return   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Ammended return The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Ammended return Also, the employee may have to pay the additional tax for making early withdrawals. Ammended return Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Ammended return See Setting Up a SEP , earlier. Ammended return Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Ammended return You must also give them notice of any excess contributions. Ammended return For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Ammended return Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Ammended return For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Ammended return Prev  Up  Next   Home   More Online Publications
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The Ammended Return

Ammended return Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Ammended return Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Ammended return An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. Ammended return In general, an executor and an administrator perform the same duties and have the same responsibilities. Ammended return For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. Ammended return It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. Ammended return Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. Ammended return The personal representative also must perform the following duties. Ammended return Apply for an employer identification number (EIN) for the estate. Ammended return File all tax returns, including income, estate and gift tax returns, when due. Ammended return Pay the tax determined up to the date of discharge from duties. Ammended return Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Ammended return If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. Ammended return Penalty. Ammended return   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Ammended return Reliance on an agent (attorney, accountant, etc. Ammended return ) is not reasonable cause for late filing. Ammended return It is the personal representative's duty to file the returns for the decedent and the estate when due. Ammended return Identification number. Ammended return   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Ammended return You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. Ammended return You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Ammended return   You can get an EIN by applying online at www. Ammended return irs. Ammended return gov (click on "Apply for an EIN Online" under the Tools heading). Ammended return Generally, if you apply online, you will receive your EIN immediately upon completing the application. Ammended return You can also apply using Form SS-4, Application for Employer Identification Number. Ammended return Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Ammended return See the form instructions for other ways to apply. Ammended return   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Ammended return After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Ammended return As the personal representative handling the estate, you must furnish this identification number to the payer. Ammended return For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. Ammended return If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. Ammended return   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). Ammended return Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. Ammended return    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Ammended return Also do not use it to make estimated tax payments for a tax year after the year of death. Ammended return Penalty. Ammended return   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. Ammended return You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. Ammended return Notice of fiduciary relationship. Ammended return   The term fiduciary means any person acting for another person. Ammended return It applies to persons who have positions of trust on behalf of others. Ammended return A personal representative for a decedent's estate is a fiduciary. Ammended return Form 56. Ammended return   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Ammended return Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Ammended return See the Instructions for Form 56 for filing requirements and other information. Ammended return   File Form 56 as soon as all the necessary information (including the EIN) is available. Ammended return It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Ammended return The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Ammended return Termination of fiduciary relationship. Ammended return   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. Ammended return See Form 56 and its instructions for more information. Ammended return   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. Ammended return See below for a discussion of these forms. Ammended return Request for prompt assessment (charge) of tax. Ammended return   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. Ammended return However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Ammended return This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Ammended return This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Ammended return This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Ammended return Form 4810. Ammended return   Form 4810 can be used for making this request. Ammended return It must be filed separately from any other document. Ammended return   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Ammended return You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. Ammended return This applies even though the returns were filed before the decedent's death. Ammended return Failure to report income. Ammended return   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. Ammended return However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Ammended return Request for discharge from personal liability for tax. Ammended return   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Ammended return The request must be made after the returns for those taxes are filed. Ammended return To make the request, file Form 5495. Ammended return For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Ammended return   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Ammended return If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Ammended return If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. Ammended return    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. Ammended return Insolvent estate. Ammended return   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. Ammended return Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. Ammended return The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. Ammended return The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. Ammended return Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. Ammended return Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Ammended return If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. Ammended return If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. Ammended return If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. Ammended return Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. Ammended return A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Ammended return See Joint Return, later. Ammended return Return for preceding year. Ammended return   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. Ammended return The return for that year will be a regular return and the personal representative must file it. Ammended return Example. Ammended return Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Ammended return Her personal representative must file her 2012 return by April 15, 2013. Ammended return Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Ammended return Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Ammended return If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Ammended return If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. Ammended return Third party designee. Ammended return   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. Ammended return This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. Ammended return It also allows the designee to perform certain actions. Ammended return See the Instructions for Form 1040 for details. Ammended return Signature. Ammended return   If a personal representative has been appointed, that person must sign the return. Ammended return If it is a joint return, the surviving spouse must also sign it. Ammended return If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. Ammended return ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Ammended return ” Paid preparer. Ammended return   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. Ammended return See the Form 1040 instructions for details. Ammended return When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. Ammended return A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. Ammended return However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. Ammended return The tax return must be prepared for the year of death regardless of when during the year death occurred. Ammended return Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Ammended return A tax return for a decedent can be electronically filed. Ammended return A personal representative may also obtain an income tax filing extension on behalf of a decedent. Ammended return Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Ammended return Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. Ammended return It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Ammended return In general, filing status depends on whether the decedent was considered single or married at the time of death. Ammended return See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Ammended return Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. Ammended return Also, the decedent may be entitled to other credits that result in a refund. Ammended return These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Ammended return Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Ammended return   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. Ammended return   If the personal representative is filing a claim for refund on Form 1040X, Amended U. Ammended return S. Ammended return Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. Ammended return Example. Ammended return Edward Green died before filing his tax return. Ammended return You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Ammended return You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. Ammended return    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Ammended return Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. Ammended return A new check will be issued in your name and mailed to you. Ammended return Death certificate. Ammended return   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Ammended return Instead, keep it for your records and provide it if requested. Ammended return Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Ammended return S. Ammended return Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Ammended return See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Ammended return Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Ammended return However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. Ammended return This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. Ammended return The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. Ammended return A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. Ammended return The filing status of the decedent in this instance is married filing a separate return. Ammended return For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Ammended return Personal representative may revoke joint return election. Ammended return   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Ammended return This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Ammended return The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. Ammended return Relief from joint liability. Ammended return   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Ammended return If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. Ammended return For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Ammended return Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. Ammended return The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Ammended return This section explains how some types of income are reported on the final return. Ammended return For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Ammended return Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. Ammended return Constructive receipt of income. Ammended return   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Ammended return Include the interest income on the final return. Ammended return   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Ammended return If the corporation customarily mailed its dividend checks, the dividend was includible when received. Ammended return If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Ammended return Do not include the dividend in the final return. Ammended return Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Ammended return If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Ammended return Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. Ammended return A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. Ammended return You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Ammended return For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). Ammended return For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. Ammended return If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. Ammended return See U. Ammended return S. Ammended return savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. Ammended return How to report. Ammended return   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Ammended return Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Ammended return Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Ammended return Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Ammended return   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Ammended return    Note. Ammended return If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. Ammended return See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Ammended return Partnership Income The death of a partner closes the partnership's tax year for that partner. Ammended return Generally, it does not close the partnership's tax year for the remaining partners. Ammended return The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. Ammended return To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. Ammended return On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Ammended return The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Ammended return The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Ammended return Example. Ammended return Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Ammended return The partnership uses a tax year ending June 30. Ammended return Mary died August 31, 2013, and her estate established its tax year through August 31. Ammended return The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Ammended return Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). Ammended return Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. Ammended return S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. Ammended return The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Ammended return The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Ammended return Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Ammended return For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. Ammended return For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Ammended return Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. Ammended return For more information, see Publication 555, Community Property. Ammended return HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. Ammended return If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. Ammended return The estate tax deduction, discussed later, does not apply to this amount. Ammended return If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Ammended return For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Ammended return Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. Ammended return The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Ammended return If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. Ammended return The estate tax deduction, discussed later, does not apply to this amount. Ammended return If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Ammended return The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. Ammended return This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. Ammended return For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Ammended return Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Ammended return These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Ammended return Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. Ammended return For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Ammended return Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Ammended return Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Ammended return This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Ammended return See Medical Expenses, later. Ammended return Exemptions You can claim the decedent's personal exemption on the final income tax return. Ammended return If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. Ammended return Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. Ammended return For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Ammended return Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. Ammended return This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Ammended return Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. Ammended return In that case medical expenses exceeding 7. Ammended return 5% of AGI may be deducted. Ammended return Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Ammended return Election for decedent's expenses. Ammended return   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Ammended return However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. Ammended return   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). Ammended return You can deduct expenses incurred in the year of death on the final income tax return. Ammended return You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. Ammended return   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Ammended return 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Ammended return Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Ammended return Making the election. Ammended return   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Ammended return The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. Ammended return This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Ammended return Example. Ammended return Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Ammended return Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Ammended return Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Ammended return Richard itemized his deductions when he filed his 2012 income tax return. Ammended return The personal representative of the estate paid the entire $800 liability in August 2013. Ammended return The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Ammended return 5% limit. Ammended return The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Ammended return 5% limit. Ammended return The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. Ammended return Medical expenses not paid by estate. Ammended return   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. Ammended return If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. Ammended return Insurance reimbursements. Ammended return   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. Ammended return The reimbursements are also includible in the decedent's gross estate. Ammended return No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Ammended return These expenses may be deductible for estate tax purposes on Form 706. Ammended return Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. Ammended return A net operating loss on the decedent's final income tax return can be carried back to prior years. Ammended return (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Ammended return ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Ammended return At-risk loss limits. Ammended return   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Ammended return   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Ammended return An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. Ammended return An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. Ammended return The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. Ammended return For more information, see Publication 925, Passive Activity and At-Risk Rules. Ammended return Passive activity rules. Ammended return   A passive activity is any trade or business activity in which the taxpayer does not materially participate. Ammended return To determine material participation, see Publication 925. Ammended return Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Ammended return   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Ammended return Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Ammended return   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Ammended return Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. Ammended return The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Ammended return   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Ammended return For more information, see Publication 925. Ammended return Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. Ammended return Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Ammended return Some of these credits are discussed next. Ammended return Earned income credit. Ammended return   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. Ammended return If the allowable credit is more than the tax liability for the year, the excess is refunded. Ammended return   For more information, see Publication 596, Earned Income Credit (EIC). Ammended return Credit for the elderly or the disabled. Ammended return   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. Ammended return The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Ammended return   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Ammended return Child tax credit. Ammended return   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. Ammended return You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. Ammended return For more information, see the Instructions for Form 1040. Ammended return Adoption credit. Ammended return   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. Ammended return   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. Ammended return See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Ammended return General business tax credit. Ammended return   The general business credit available to a taxpayer is limited. Ammended return Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Ammended return Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Ammended return   After the carryforward period, a deduction may be allowed for any unused business credit. Ammended return If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Ammended return   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Ammended return Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. Ammended return Self-employment tax. Ammended return   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. Ammended return 28 or more. Ammended return Alternative minimum tax (AMT). Ammended return   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Ammended return The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Ammended return In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Ammended return Form 6251. Ammended return    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Ammended return See the form instructions for information on when you must attach Form 6251 to Form 1040. Ammended return Form 8801. Ammended return   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Ammended return See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Ammended return Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. Ammended return Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. Ammended return Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. Ammended return For this purpose, a qualified hazardous duty area is treated as a combat zone. Ammended return If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Ammended return If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Ammended return Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. Ammended return If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Ammended return Also, if any tax was collected after the date of death, that amount will be credited or refunded. Ammended return The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. Ammended return This is true even if death actually occurred earlier. Ammended return For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Ammended return Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. Ammended return S. Ammended return employee, and In a military or terrorist action. Ammended return The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. Ammended return Example. Ammended return The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Ammended return S. Ammended return employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. Ammended return Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Ammended return Military or terrorist action defined. Ammended return   A military or terrorist action means the following. Ammended return Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Ammended return Any military action involving the U. Ammended return S. Ammended return Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. Ammended return   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Ammended return Military action does not include training exercises. Ammended return Any multinational force in which the United States is participating is treated as an ally of the United States. Ammended return Determining if a terrorist activity or military action has occurred. Ammended return   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Ammended return Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Ammended return Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Ammended return The April 19, 1995, terrorist attack on the Alfred P. Ammended return Murrah Federal Building (Oklahoma City). Ammended return The September 11, 2001, terrorist attacks. Ammended return The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Ammended return The Act also exempts from federal income tax the following types of income. Ammended return Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Ammended return Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Ammended return Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Ammended return Payments from the September 11th Victim Compensation Fund 2001. Ammended return The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Ammended return See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Ammended return Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. Ammended return The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Ammended return For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Ammended return However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). Ammended return For more information on the Act, see Publication 3920. Ammended return Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. Ammended return If any tax is still due, it will be canceled. Ammended return The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. Ammended return If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. Ammended return Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Ammended return This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. Ammended return Filing a claim. Ammended return   Use the following procedures to file a claim. Ammended return If a U. Ammended return S. Ammended return individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Ammended return Form W-2, Wage and Tax Statement, must accompany all returns. Ammended return If a U. Ammended return S. Ammended return individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Ammended return You must file a separate Form 1040X for each year in question. Ammended return   You must file these returns and claims at the following address for regular mail (U. Ammended return S. Ammended return Postal Service). Ammended return    Internal Revenue Service 333 W. Ammended return Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. Ammended return On the applicable return, write the same phrase on the line for total tax. Ammended return If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. Ammended return   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Ammended return On joint returns, make an allocation of the tax as described below under Joint returns. Ammended return If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. Ammended return   You must attach Form 1310 to all returns and claims for refund. Ammended return However, for exceptions to filing Form 1310, see Form 1310. Ammended return Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Ammended return   You must also attach proof of death that includes a statement that the individual was a U. Ammended return S. Ammended return employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Ammended return For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Ammended return For other U. Ammended return S. Ammended return civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Ammended return For other U. Ammended return S. Ammended return civilian employees killed overseas, attach a certification from the Department of State. Ammended return   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Ammended return Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. Ammended return Joint returns. Ammended return   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Ammended return Determine the decedent's tax liability as follows. Ammended return Figure the income tax for which the decedent would have been liable if a separate return had been filed. Ammended return Figure the income tax for which the spouse would have been liable if a separate return had been filed. Ammended return Multiply the joint tax liability by a fraction. Ammended return The numerator of the fraction is the amount in (1), above. Ammended return The denominator of the fraction is the total of (1) and (2). Ammended return   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Ammended return Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Ammended return Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Ammended return If a personal representative has been appointed, the personal representative must sign the return. Ammended return If it is a joint return, the surviving spouse must also sign it. Ammended return If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. Ammended return If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Ammended return ” To claim a refund for the decedent, do the following. Ammended return If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Ammended return If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. Ammended return (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Ammended return ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). Ammended return If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. Ammended return Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. Ammended return Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Ammended return Joint return by surviving spouse. Ammended return   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. Ammended return Decedent as your dependent. Ammended return   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. Ammended return   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Ammended return To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. Ammended return To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. Ammended return Qualifying widows and widowers. Ammended return   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. Ammended return Requirements. Ammended return   Generally, you qualify for this special benefit if you meet all of the following requirements. Ammended return You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Ammended return You did not remarry before the end of the current tax year. Ammended return You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Ammended return You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. Ammended return Example. Ammended return William Burns' wife died in 2010. Ammended return William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Ammended return For 2010, he was entitled to file a joint return for himself and his deceased wife. Ammended return For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Ammended return For later years, he may qualify to file as a head of household. Ammended return Figuring your tax. Ammended return   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Ammended return Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Ammended return   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Ammended return Joint return filing rules. Ammended return   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. Ammended return See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Ammended return Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. Ammended return If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. Ammended return This exclusion does not apply to certain income. Ammended return For more information, see Publication 3920. Ammended return How To Report Income in respect of a decedent must be included in the income of one of the following. Ammended return The decedent's estate, if the estate receives it. Ammended return The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Ammended return Any person to whom the estate properly distributes the right to receive it. Ammended return If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. Ammended return See Estate Tax Deduction, later. Ammended return Example 1. Ammended return Frank Johnson owned and operated an apple orchard. Ammended return He used the cash method of accounting. Ammended return He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Ammended return The proceeds from the sale are income in respect of a decedent. Ammended return When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Ammended return When Frank's widow collects the $2,000, she must include that amount in her return. Ammended return It is not reported on the final return of the decedent or on the return of the estate. Ammended return Example 2. Ammended return Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Ammended return The amount accrued from the sale of the apples would be included on his final return. Ammended return Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Ammended return Example 3. Ammended return On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Ammended return His adjusted basis in the tractor was $2,000. Ammended return George died on February 15, before receiving payment. Ammended return The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. Ammended return In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Ammended return Example 4. Ammended return Cathy O'Neil was entitled to a large salary payment at the date of her death. Ammended return The amount was to be paid in five annual installments. Ammended return The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Ammended return The payments are income in respect of a decedent. Ammended return None of the payments were includible on Cathy's final return. Ammended return The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. Ammended return Example 5. Ammended return You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Ammended return You inherited the right from your mother, who acquired it by bequest from your father. Ammended return Your mother died before she received all the commissions she had the right to receive, so you received the rest. Ammended return The commissions are income in respect of a decedent. Ammended return None of these commissions were includible in your father's final return. Ammended return The commissions received by your mother were included in her income. Ammended return The commissions you received are not includible in your mother's income, even on her final return. Ammended return You must include them in your income. Ammended return Character of income. Ammended return   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. Ammended return If the income would have been a capital gain to the decedent, it will be a capital gain to you. Ammended return Transfer of right to income. Ammended return   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. Ammended return   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. Ammended return   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. Ammended return See Installment obligations, later. Ammended return Transfer defined. Ammended return   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. Ammended return Installment obligations. Ammended return   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. Ammended return Include in your income the same profit the decedent would have included had death not occurred. Ammended return For more information, see Publication 537, Installment Sales. Ammended return   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. Ammended return Transfer to obligor. Ammended return   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). Ammended return A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Ammended return An obligation that becomes unenforceable is treated as having been canceled. Ammended return   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. Ammended return The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. Ammended return   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Ammended return Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. Ammended return Wages. Ammended return   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. Ammended return The income is not reduced by any amounts withheld by the employer. Ammended return If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. Ammended return   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Ammended return However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Ammended return These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Ammended return These wages are not included in box 1 of Form W-2. Ammended return   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe