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Discussion Forum Index --> Consumer Questions --> Executor Fee
Worcwebbs (talk|edits) said:
| 13 September 2006
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| My husband received $40,000 as a one time fee as executor to his mothers estate - at the advice of the estates tax attorney (who has since passed away!) We claimed this as income on our tax return and paid the appropriate taxes. Recently the estate was told by the IRS that they disallowed this entire amount and cut the allowance in half. We understand that we have to file a 1040X to ammend our taxes. However, in the mean time, we have just received a notice from the IRS that states that they considered the $40,000 as "Self Employment Income"....now what? Any idea why. My husband is in the auto repair trade -- can I assume/hope that this is a mistake???
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Death&Taxes (talk|edits) said:
| 13 September 2006
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| Revenue Ruling 58-5 covers Executor Fees and Self-employment tax. Unless your husband is a professional fiduciary, which is unlikely(!) or he ran a business for the estate, it is highly unlikely this income is subject to that tax. More than likely the attorney issued a Form 1099-MISC for the Executor Fee, classifying the income as Non-Employee Compensation. Secure a professional to prepare your 1040X, any State amendment, and to write the letter regarding this issue.
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Taxea@hawaii.rr.com (talk|edits) said:
| 13 September 2006
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| Also be sure to include all expenses incurred for the work done to lower the taxable amount of the income. Unless very special circumstances exist, 1099-MISC should go on a Sch C. taxeataxea 16:58, 13 September 2006 (CDT)
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Dennis (talk|edits) said:
| 13 September 2006
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| The difference between statutory and actual executor's commission may very well be self employment income. The argument would be you must have done something to earn it. The IRS has the power to deny a deduction for what they consider excess commissions but not the authority to lower them. There should have been no way for you to be paid without consent. An amended return does not seem appropriate. If the calculation was in error and you have to give some of the money back you would use a claim of right procedure. Do seek professional help and do not use a schedule C to report statutory commissions.
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Riley2 (talk|edits) said:
| 14 September 2006
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| You have several issues here. An auto repair person generally cannot realize self-employment income from an estate unless the estate is engaged in a trade or business. If the taxable income from the estate is now increased as a result of the disallowed executor's commissions, then it would seem that you should be amending to report this increased income. In addition, if the disallowed executor's commission is the result of the Service's determination that some portion of the original commsssion is in reality a distribution of corpus, then you may need to reduce your taxable income for this reclassification. I agree with Dennis that you should be consulting a tax professional so that you can deal with all of these issues simultaneously.
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Larryfred (talk|edits) said:
| 15 October 2009
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| These non-professional executor fees are not subject to self employment taxes and contrary to an earlier post they do not go on SCH C. Even though entered in box 7 of form 1099-MISC it is an exception to the rule. When entering into your tax program on your form 1099-MISC you should have a box to check to force this income onto form 1040 on either line 7 or line 21....SEE PUBLICATION 559, PAGE 3 UNDER HEADING "FEES PAID TO PERSONAL REPRESENTATIVES ALSO YOU CAN REFER TO REVENUE RULING 58-5
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