Issuing a final paycheck to the estate of a deceased employee
PrintOverview
How to issue a final paycheck to the estate of a deceased employee and ensure that the employee shows as deceased on the W-2 form at the end of the year.
Assumptions
The deceased was a current employee in your employee list.
Expected Outcome
You will create a final paycheck.
Details
Go the employee area.
- QuickBooks Pro and Premier: Click on Employees on the top menu bar, then select Employee Center.
- QuickBooks Simple Start: Click on Payroll at the top. In the Payroll Center, click on Employees at the top and then select View/Edit Employees.
Double-click the appropriate employee to open the Edit Employee window.
In the Change tabs drop-down list, select Personal Info.
QuickBooks 2013: Click the Personal tab.
Type Estate of [employee name] in the Print on checks as field, and then click OK.
Create a final paycheck for the employee.
From the QuickBooks Lists menu, choose Employee List.
Select the employee, and then from the Employees drop-down list, select Edit.
In the Change tabs drop-down list, select Employment Info.
QuickBooks 2013: Click the Employment Info tab.
Enter the appropriate date in the Release Date field.
Press Tab. The Deceased box will appear.
Select the Deceased checkbox, and click OK.
Important Notes:
- If an employee dies during the year, you must report the accrued wages, vacation pay, and other compensation paid after the date of death. The employee may be required to have a W-2 as well as a 1099.
- If the payment is made in the same year that the employee died, you must withhold Social Security and Medicare taxes on the payment and report the payment on the employee's Form W-2. These wages must only report as Social Security and Medicare wages to ensure proper Social Security and Medicare credit is received. On the employee's Form W-2, show the payment as Social Security wages (Box 3) and Medicare wages and tips (Box 5) and Social Security and Medicare wages withheld in boxes 4 and 6. Do not show the payment in box 1.
- Check state laws before reissuing the deceased employee's paycheck. Please check with the state for any requirements regarding who can receive the check and what is required as payment (such as vacation time but not sick time).
- See Custom Payroll Item Setup for the custom set up of the payroll items to be used on the check.
- If you made the payment after the year of death, do not report it on Form W-2, and do not withhold Social Security and Medicare taxes.
- If the employee received a W-2 for the current year, an amendment may be necessary.
- When the payment is provided to the estate or beneficiary; the IRS requires that it is reported Box 3 of Form 1099-MISC, Miscellaneous Income. Use the name and taxpayer identification number (TIN) of the payment recipient on Form 1099-MISC. This applies whether the payment is made in the year of death or after the year of death.
