• LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

5 steps to take when an employee passes away

Get PDF file

by on
in Compensation and Benefits,Human Resources

Beyond its obvious emotional impact, an employee’s death almost always leaves unfinished business for HR and payroll to handle. Follow these steps to help smooth the process:

1. Ask the family for a death certificate (usually available about one to two weeks after the death) and whether a federal tax ID number exists for the estate. That may seem intrusive, but you should receive valid proof of death before cutting the final paycheck to a family member.

2. Begin the COBRA notification process. An employee’s death counts as a COBRA-qualifying event for spouses and dependent children. If your organization must comply with COBRA, begin the paperwork necessary to notify your insurance carrier and survivors. Let survivors know how to file any life insurance claims as well.

3. Determine who should receive the employee’s final wages: an estate administrator or a family member.

4. Carefully record and report before- and after-death payments if final wages are paid in the same year. Withhold FICA if the final paycheck is cut in the same year as the employee’s death. Use IRS Form 1099-MISC to report payments made after the employee dies. At year-end, use IRS Form W-2 to report total compensation before death as well as any Medicare and Social Security deductions.

5. Don’t withhold employment taxes if final wages are paid the following year. Any outstanding wages that aren’t paid until the next calendar year aren’t subject to federal income, Social Security or Medicare taxes.

Leave a Comment