STATE OF CONNECTICUT
THE STATE COMPTROLLER
MEMORANDUM NO. 2000-19
April 27, 2000
TO THE HEADS OF ALL STATE AGENCIES
|Attention:||Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers|
|Subject:||Deceased Employee's Wages|
I. PURPOSE: The purpose of this memorandum is to provide additional information regarding salary payments upon the death of a state employee.
II. AUTHORITY: Section 5-253 of the Connecticut General Statutes concerns payment for extra hours of work and accumulated vacation allowance upon the death of a state employee and the terms under which such payment is made.
The Internal Revenue Service (IRS) provides information about reporting a deceased employee's wages as a special reporting situation in the instructions for Form W-2.
III. NOTIFICATION: Agencies report the death of an employee to the Office of the State Comptroller using form CO-638, Notice of Death of State Employee. This form is available through the Forms Management Contract with Vanguard Direct.
IV. REPORTING TO THE IRS: When an employee dies, any accrued wages, vacation pay, and other compensation paid after the date of death must be reported to the IRS.
If the payment is made in the same calendar year the employee died, Social Security and Medicare taxes on the payment must be withheld and the payment reported on the employee's Form W-2 as Social Security and Medicare wages. This will ensure the deceased employee's survivors receive the benefit of proper social security and Medicare credits.
The payment must also be reported on Form 1099-MISC, Miscellaneous Income, as a payment to the beneficiary or estate. The name and Taxpayer Identification Number of the beneficiary or estate must be used on Form 1099-MISC.
If the payment is made after the calendar year of death, it is not subject to Social Security and Medicare taxes and is not reported on Form W-2.
However, the payment must be reported on Form 1099-MISC, Miscellaneous Income, as a payment to the beneficiary or estate. The name and Taxpayer Identification Number of the beneficiary or estate must be used on Form 1099-MISC.
V. PAYROLL PROCEDURES: Payments made in the calendar year of the employee's death are made through payroll. All wages due to the employee, including but not limited to regular earnings, vacation pay, longevity, sick pay and overtime, must be combined and paid under D/OE16. Agency payroll staff must close all active deductions other than retirement, prior to or at the time of the final payment. No deductions other than retirement and FICA/Medicare should be made from this payment.
The Payroll Services Policy Manual section regarding "Salary Payments at Time of Death" will be revised with the next update of the Manual.
VI. ACCOUNTS PAYABLE PROCEDURES: The following documents must be submitted to the Accounts Payable Division for accrued wages, vacation pay, and other compensation paid after the calendar year of death:
If accrued wages, vacation pay, and other compensation are paid in the calendar year of death, the Comptroller's Payroll Services Division will provide the information to the Accounts Payable Division.
If an employee dies at the end of the calendar year and the check date falls in the following calendar year, then payment documents must be submitted to the Accounts Payable Division. Refer to Section VI.
A Form 1099-MISC will be issued at the end of the calendar year to the beneficiary or estate whether the payment is made in the year of death or after the year of death.
VII. QUESTIONS: Questions concerning this memorandum may be directed to:
Payroll Services Division, (860) 702-3448;
Accounts Payable Procedures:
Accounts Payable Division, (860) 702-3403;
Policy Services Division, (860) 702-3434.
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