Income in respect of a decedent (IRD) refers to income that a deceased person had earned or had the right to receive during their lifetime but were unable to receive due to their death. The IRS taxes this income as if the decedent was still living, which means the beneficiary of this income is responsible for paying the income tax. This tax does not come with any deductions or credits that an individual would usually receive if the income was earned or received in the same year.

IRD includes wages, salaries, and other forms of compensation and benefits the decedent had earned or was due to receive in their lifetime, but they passed away before they received it. This income can come from any source, such as their employer, pension plans, Social Security, and even annuities they had purchased. Because IRD income is still considered taxable income, the beneficiary of this income is responsible for reporting this income to the IRS and paying the taxes that are due. The tax rates for income in respect of a decedent will depend on the type of income source, as well as the filing status of the beneficiary, and their tax bracket.

Paying taxes on IRD income can be a complicated process for both the executor of the decedent’s estate and the beneficiary. The executor of the estate is responsible for reporting all IRD income to the IRS and filing the correct forms with the agency. The beneficiary receiving the income is then responsible for filing a return and claiming the income as their own. It is important for the executor and beneficiary to work together to ensure that both parties are aware of the taxes that are due so that the taxes are paid in a timely manner.

Income in respect of a decedent can be difficult to understand, but understanding how it works and how to pay associated taxes can help beneficiaries and executors manage their taxes following the death of a loved one.