Reporting Wages for a Deceased Employee

This article provides guidance on best practices for reporting a deceased employee's wages.

The tax treatment and reporting obligations for wages paid after an employee’s death depend on when the wages are paid in relation to the employee’s death.
 

If the employee dies after a check is issued, but before the check is cashed:

The employer should reissue the check to the employee’s personal representative for the same net amount, since income and employment taxes were properly withheld. The wages and amounts withheld must be reported on the deceased employee’s Form W-2.

 

If the employee dies before a check is issued, then the wages are paid in the year of death:

Wages paid to a deceased employee’s estate or legal representative after the employee dies, but in the year of the employee's death are not subject to federal income tax withholding; however, they are subject to Social Security, Medicare, and FUTA taxes. Therefore, the employer must report the Social Security and Medicare wages and the amounts withheld on the deceased employee’s Form W-2 in Boxes 3–6.

The amount of taxable income (generally the gross amount of the wages owed) should be reported only in Box 3 (Other) of Form 1099-MISC in the name of the beneficiary of the payment.

 

If the employee dies before a check is issued, then the wages are paid after the year of death:

Wages paid to a deceased employee’s estate or legal representative after the year of the employee’s death are not subject to federal income tax withholding or Social Security, Medicare, or FUTA taxes; they should be reported only in Box 3 (Other) of Form 1099-MISC in the name of the beneficiary of the payment.

 

Note: Before reissuing the deceased employee’s paycheck, the employer must check state law for any requirements regarding who can receive the check, how much can be paid, etc. Please visit this IRS page for further information.