Answer: The check should be made payable to the deceased employee’s estate or beneficiary. The deceased employee’s accrued wages and benefits paid in the same calendar year as death are subject to FICA withholding and reporting only. On this employee’s final W-2, show the payment in Boxes 3 and 5, and the taxes withheld in Boxes 4 and 6. The estate or beneficiary must receive Form 1099-MISC. Report the payment in Box 3. It seems like duplicate reporting, but it’s not. The Social Security Administration uses this information to calculate benefits; the IRS needs the payment information because the estate or beneficiary has income.
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