I don’t know, because I don’t take clients who are so grief-stricken that they can’t get to the bank and close the accounts for nine months. At least that would stop the tax withholding. But death does cause all sorts of problems like this – sometimes the family can’t agree on who’s in charge, for a year. I would do a nominee distribution from the 1040 Schedule B to the estate, but claim all of the withholding on the 1040. There’s no little man with a green eye shade, checking every line to make sure the return is correct. But if there were, that might be exactly what he would suggest.

I came across an interesting situation today, speaking of dead people with interest income. $120,000 face value, $200,000 redemption value of savings bonds. Taxpayer had been talked into a living trust, so no probate is necessary, right? But the bonds were just in her name, and Treasury says if the amount exceeds $100,000 they need a court appointment. Has anyone else come across that?

And of course, many preparers are unaware that the accumulated interest can be reported on the decedent’s final 1040, which is often the best place to report it.