TOD Accounts and 1099's

**paleolith** · 06-11-2010, 04:18 PM

Florida, though I think the issue is entirely federal. Mostly a practical question.

My mom died 28 April 2009. She had investment accounts at UBS and Morgan-Stanley which were TOD to me and my two sisters. Both UBS and MS sent a single 1099 for the interest and dividends for 2009, in my mom's SSN, even though they received and acknowledged the documentation of my mom's death last year. I even asked a UBS rep about this at one point and he said "don't worry, the accountants will figure it out".

Well, the accountants beg to disagree. For my taxes, my accountant allocated 1/4 of the 1099 income to me (3/4 of the year, 1/3 of that portion). I took his approach and had my sisters do the same, and we all filed our returns that way. (I'm my mom's PR, so I'm taking the lead on this even though it's not a probate issue.)

For various reasons we are only now trying to get my mom's 2009 taxes finalized. Her accountant took those 1099s and allocated all the income to my mom, since the 1099s had her SSN only. He says that without separate 1099s, I will get into unending correspondence with the IRS and be sorry I tried to split it out, and that getting UBS and MS to issue correct 1099s will be just about as hard.

None of this would matter except that my mom was in the 10% bracket for all the interest and dividend income, while all three beneficiaries were in the 0% bracket last year. The income involved is over $9000, so the tax difference is about $900.

So what are my options, in practical terms? How hard might I have to push UBS and MS to give us proper 1099s? (Do I have the right to insist that they do so?) How hard would it really be to convince the IRS to accept our division without the corrected 1099s? Are we better off forgetting about the $900? Are there other options I haven't considered?

(And to satisfy curiosity, the reason we haven't cashed out these accounts is because each contains a large CD with an interest rate not obtainable today. We will split up one account this year, and the other next year, when the CDs mature.)

Edward

**llworking** · 06-13-2010, 06:58 AM

Quoting paleolith

Florida, though I think the issue is entirely federal. Mostly a practical question.

My mom died 28 April 2009. She had investment accounts at UBS and Morgan-Stanley which were TOD to me and my two sisters. Both UBS and MS sent a single 1099 for the interest and dividends for 2009, in my mom's SSN, even though they received and acknowledged the documentation of my mom's death last year. I even asked a UBS rep about this at one point and he said "don't worry, the accountants will figure it out".

Well, the accountants beg to disagree. For my taxes, my accountant allocated 1/4 of the 1099 income to me (3/4 of the year, 1/3 of that portion). I took his approach and had my sisters do the same, and we all filed our returns that way. (I'm my mom's PR, so I'm taking the lead on this even though it's not a probate issue.)

For various reasons we are only now trying to get my mom's 2009 taxes finalized. Her accountant took those 1099s and allocated all the income to my mom, since the 1099s had her SSN only. He says that without separate 1099s, I will get into unending correspondence with the IRS and be sorry I tried to split it out, and that getting UBS and MS to issue correct 1099s will be just about as hard.

None of this would matter except that my mom was in the 10% bracket for all the interest and dividend income, while all three beneficiaries were in the 0% bracket last year. The income involved is over $9000, so the tax difference is about $900.

So what are my options, in practical terms? How hard might I have to push UBS and MS to give us proper 1099s? (Do I have the right to insist that they do so?) How hard would it really be to convince the IRS to accept our division without the corrected 1099s? Are we better off forgetting about the $900? Are there other options I haven't considered?

(And to satisfy curiosity, the reason we haven't cashed out these accounts is because each contains a large CD with an interest rate not obtainable today. We will split up one account this year, and the other next year, when the CDs mature.)

Edward

Have your accountant do your mother's taxes this year. Your accountant did it correctly. Or, in the alternative, have your mother's accountant research the term "nominee interest".

**paleolith** · 06-13-2010, 08:28 PM

Thanks very much, that's clearly what I needed. No idea why that accountant thinks it's so hard, unless he's concerned about the fact that he should have told me this back in March when I could file the necessary 1099s on time. Speaking of which ... it was a bit harder to find out what happens with a late filed 1099, but I gather that between 30 days late and Aug 1, the penalty is $30/form. How likely is it that the IRS will actually assess that? It's only six forms (INT and DIV, 3 recipients), so $180 is still better than >$900.

Thanks again,

Edward

**llworking** · 06-16-2010, 04:48 AM

Quoting paleolith

Thanks very much, that's clearly what I needed. No idea why that accountant thinks it's so hard, unless he's concerned about the fact that he should have told me this back in March when I could file the necessary 1099s on time. Speaking of which ... it was a bit harder to find out what happens with a late filed 1099, but I gather that between 30 days late and Aug 1, the penalty is $30/form. How likely is it that the IRS will actually assess that? It's only six forms (INT and DIV, 3 recipients), so $180 is still better than >$900.

Thanks again,

Edward

I really cannot tell you. I have never had a client come back to me complaining about actually being penalized for late 1099s. Most likely because the penalty is not very high. Therefore I do not know how often the IRS actually assesses the penalty.