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Columns: Tax Talk
George Saenz, CPA Expert: George Saenz, CPA
Tax Talk
When to pay taxes on Social Security survivor benefits
Tax Talk

Do children owe tax on death benefit?

Dear Tax Talk:
My husband died when my children were 6 months and 2 years old. As a result, I receive a monthly check for each of them from Social Security and will continue to do so until they turn 18 or, in their case, graduate from high school. Am I required to file a tax return on their behalf? My understanding is that I do not, because this is not earned income on their part but a death benefit.
-- Holly

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Dear Holly,
Social Security survivors benefits provide benefits to children of deceased workers as well as their spouses caring for the children. The SSA Web site explains survivors benefits:

1. The loss of the family wage earner can be devastating, both emotionally and financially. Social Security helps by providing income for the families of workers who die. In fact, 98 of every 100 children could get benefits if a working parent dies. And Social Security pays more benefits to children than any other federal program.

2. The value of the survivors insurance you have under Social Security is probably more than the value of your individual life insurance.

Generally, if a parent dies before a child reaches age 18, the child can get a monthly benefit. The benefit is usually paid to the surviving parent of the child, but the income really belongs to the child. The Form 1099-SSA issued by Social Security will report the benefits in the child's name and Social Security number. The surviving parent would not include the child's benefit in his or her individual tax return.

It is a parent's responsibility to make sure his or her minor children comply with the tax law and file any necessary tax returns and pay the tax thereon. Social Security benefits, whether survivors benefits or regular retirement income, are taxable only if they exceed a threshold when combined with other income of the individual.

To find out whether any of the child's benefits may be taxable, compare the base amount for their filing status (single) with the total of:

  1. One-half of their benefits.
  2. Plus all their other income, including tax-exempt interest.

The base amount for a single taxpayer is $25,000. If the child's only income is the Social Security survivors benefits, he or she would not owe any tax or be required to file a tax return.

Bankrate.com's corrections policy-- Posted: Nov. 28, 2007
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