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.
After creating a final check to the employee, mark this employee as Deceased in the setup.
To mark employee as deceased:
Intuit Online Payroll and Intuit Full Service Payroll
- Go to Employees.
- Select the name of the employee.
- In the Employment section, select Edit.
- From the Status drop-down, select Deceased.
- Select OK.
QuickBooks Online Payroll and QuickBooks Full Service Payroll
- Select Workers from the left menu > Employees.
- Select the name of the employee on the list.
- Select edit (pencil) icon beside Employment.
- Under Status, select Deceased on the drop down.
- Select Done.
- 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).
- 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. Please refer to General Instructions for Forms W-2 and W-3 for more information.
Note: For additional information about paying a deceased employee, please consult with an accounting or tax professional. You may also visit the IRS website for more details.