If an employee dies and in the same year, the Payroll Source indicate that the wages should be paid to a deceased employee's estate or legal representative. It also states that the amount of taxable income should be reported on Form 1099-MISC in the name of the beneficiary. How soon do the wages need to be paid since the family may not be able to finalize that information after the death? Is there any guidance if the family is unresponsive and we are unable to get the deceased employee's estate and name of the beneficiary? Thank you!
IRS regulations are quite clear about how deceased employee payments need to be taxed and reported, but they don’t address WHEN those payments must be made. State law often designates the amount and to whom payments can be made, but again, they don’t say WHEN.
Generally, it’s best to contact legal counsel in deceased employee payment situations because determining who has the legal right to get the money may need to be decided by a court. If a payment is made payable to an estate, an attorney will likely be handling those funds. So when are we required to make the payments owed to a deceased employee? When it has been legally determined who is to receive those payments.
Thanks for asking APA!
When to Pay Wages to a Deceased Employee's Estate