A man stops working in 2005. Files for Social Security disability. He dies in 2006, before his claim is paid. The lump sum benefits are paid to his daughter. The SSA 1099 shows father's name in Box 1 and Box 2 (ssn) is blank. Does this income properly belong on the father's 2006 return or must it be claimed by the daughter? Thanks for your thoughts
What is in box 5? This is Dad's income, not daughter's income. Dad may not have to file a return. Missy Doyle
Normally, SS Disability Benefits are excluded from the gross income of the recipient. When a taxpayer dies, his tax year ends on the date of death, so it would not go on his return, even if paid before his death. The "income in respect of a decedent" treatment allows the income recipient (daughter) to treat it on her taxes the same way it would have been treated on the decedent's taxes-wholly excluded from income. Therefore, it is totally tax free, totally excluded, and not even shown anywhere on her 2006 return.
[snip]
SSA disability benefits are treated no differently than SSA benefits. They are taxable (up to 85% of the benefit) to the extent that the recipients other gross income exceeds certain levels.
-- Alan
It (a) belongs on the father's return and (b) is probably not taxable unless the father had significant other income in 2006.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.