How should I report my son's lump-sum death benefit payment from his grandmother's annuity?

How should I report my son's lump-sum death benefit payment from his grandmother's annuity?

by Paul S. Carpenter, CPA | Feb 02, 2018
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My 6-year-old son received a lump-sum death benefit payment from his grandmother's annuity. It was under $1,000. We paid 20 percent withholding tax on this payment. We will be receiving a 1099-R. How do I handle this on my taxes? Should the tax be refunded? We are a low-income family.

Technically, you may elect to report this income as the parent on your own tax return or file a separate return in your son's name. See IRS Publication 929 for instructions.

I suggest filing a separate return in your son's name. There will be no tax, and he will get a refund for the amount withheld. I think there will be less chance for error on the IRS’s end by doing this.

A college fund could be in his future!

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Paul S. Carpenter, CPA, is president of Carpenter Capital Advisors in Johnstown, Pa.

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