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Author: nwvic Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Re: 1099 R overstated Date: 5/24/2010 3:52 PM
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Conclusion

Original post:

Client was receiving disability payments of $500 per month, but passed away in August. Spouse received, but did not cash, checks for Sept. through Dec. Spouse says Aetna unwilling to change 1099. Amount flows to line 7, wages. Any way to fix this without Aetna's help that won't cause data mismatch letters from IRS?

Peter's suggestion to perhaps include the overpayment on line 21 was the most helpful, except that messed with a wage based credit that resulted in a refund that was too large, and undefendable. Believing that there must be a way, I poked around until I found a worksheet for line 7 that included a user defined line item. I don't know why I didn't find it before - I looked more than once - but distractions abound and I'm just glad I finally found it. I included the 1099 as received, and entered a negative amount on the detail line. I'm content with the result. While the IRS may still question the return, there will be no automatic data mismatch letter, everything appears defensible to me, and I didn't have to manually override the program - which often causes more problems than it solves.

I especially appreciated Bill's response that, while not offering a solution, nailed the explanation of the problem.

It sounds like these disability checks were supposed to end with the death of the husband. If neither the surviving spouse, nor the estate of the deceased, was entitled to them, then they were not negotiable by anyone, and it doesn't sound like they're income to anyone. If a check made out to somebody else magically appears in my mailbox, it is not my income.

and

Except that the IRS seldom gives a favorable response to the taxpayer's first request to a notice - reading comprehension is a notable problem there - and even more seldom do they just take your word for it. Their implicit position is that 1099s are the gospel truth, unless you can PROVE otherwise. And that can be tricky.

Pet peeves of mine, since IRS correspondence is a lot of what I do in the month of May, after the nonprofit returns are due May 15.


I was not asked to file an estate return, and I'm not convinced one is necessary. As to the true details and timing of communication between Aetna and spouse, I won't speculate. My auditing days are behind me. I either take my clients at their word or send them down the road.

Thanks to all who responded. This is a great forum and I appreciate the civil, helpful atmosphere. I had three clients, three friends and an in-law pass away last year - so having this resource is very helpful.

Foolish regards,

Vic
ancora imparo
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