1099 – NEC and Retirement Plan Contributions
A client is receiving 1099-NEC income from deferred director compensation earned by his deceased wife. This flows through on his schedule C and he pays self-employment taxes. Is that income eligible for a retirement contribution of any kind? For example could he use this income to make a Roth IRA contribution, or more aggressively, a SEP contribution?
Permalink Submitted by Alan - IRA critic on Wed, 2025-01-22 12:30
Basically, an IRA contribution cannot be made for a decedent post death with decedent’s income and the 1099 was issued to his wife. However, a SEP contribution is made by the employer, so can be made post death.
That said, how does the Sch C relate to this? Were both spouses filing a Sch C for the same business with the NEC issued by a non related employer?
Permalink Submitted by Kevin Reardon on Wed, 2025-01-22 16:41
No. The wife died several years ago and the 1099 is for her deferred comp that is paying out over several years. The accountant is reporting the 1099 income on the husband’s Schedule C.
Permalink Submitted by Alan - IRA critic on Thu, 2025-01-23 11:41
If this is reported as SE income of the client and SE taxes are being paid, an IRA contribution could likely be made based on that income. That said, I have no idea if such income paid to a decedent’s beneficiary is being reported correctly, mostly due to the fact that wife is deceased yet fee payments are continuing after many years.