Do I need separate forms for interest and dividends earned under the estate EIN versus the decedent’s SSN? – North Carolina

Short Answer

Yes. In North Carolina, income through the date of death (reported under the decedent’s SSN) goes on the decedent’s final individual returns (IRS Form 1040 and NC Form D-400). Income after death (reported under the estate’s EIN) belongs to the estate and is reported on the estate’s fiduciary returns (IRS Form 1041 and NC Form D-407). If a payer issued a 1099 under the wrong TIN, ask for a corrected form and keep records that show the split at the date of death.

Understanding the Problem

You’re the North Carolina executor asking whether post-death interest, dividends, and sale gains must be reported on different tax returns than pre-death income. The decision point is: income earned before death is the decedent’s, while income earned after death is the estate’s. You also need to sell securities, which typically requires an estate brokerage account under the estate’s EIN.

Apply the Law

Under North Carolina law and federal rules applied here, an estate is a separate taxpayer from the decedent. That means you file: (1) the decedent’s final individual returns (covering income up to the date of death) and (2) the estate’s fiduciary returns (covering income after death). The main forums are the IRS (Form 1040 and Form 1041) and the North Carolina Department of Revenue (Form D-400 and Form D-407). The estate can choose a fiscal year; the federal fiduciary return is due on the 15th day of the fourth month after the estate’s fiscal year ends, and the NC D-407 follows when a federal fiduciary filing is required.

Key Requirements

• Separate taxpayers: The decedent (SSN) and the estate (EIN) are different taxpayers, so pre- and post-death income are reported on different returns.
• Timing split at death: Interest, dividends, and gains earned through the date of death go on the decedent’s final 1040/D-400; amounts earned after death go on the estate’s 1041/D-407.
• Use an EIN and estate account: Open accounts in the estate’s name with its EIN so payers issue 1099s to the estate for post-death income and sales (e.g., 1099-INT/DIV/B).
• Filing thresholds and deadlines: File Form 1041 if the estate has $600+ gross income or any beneficiary who is a nonresident alien; NC D-407 is due when the federal fiduciary return is required and the estate has NC nexus; Form 1041/D-407 are due the 15th day of the fourth month after the estate’s fiscal year ends.
• Extensions available: You can request a federal extension (Form 7004) and an NC extension (Form D-410P); pay any expected tax with the extension to avoid penalties.

What the Statutes Say

• North Carolina Gen. Stat. § 105-160.2 (Tax on income of estates and trusts) – NC imposes income tax on undistributed net income of estates with NC connections and ties filing to federal fiduciary rules.
• North Carolina Gen. Stat. § 28A-13-3 (Powers of personal representative) – Authorizes the executor to collect, manage, and control estate assets, which includes opening and retitling accounts in the estate’s name and EIN.

Analysis

Apply the Rule to the Facts: You, as executor, sold stocks after death, so that capital gain is estate income reported on Form 1041 and NC Form D-407 under the estate’s EIN. To sell remaining shares, open a brokerage account in the estate’s name with its EIN so future 1099s (including 1099-B, 1099-DIV, 1099-INT) reflect the estate. If any post-death interest or dividends were paid under the decedent’s SSN, request corrected 1099s or document the date-of-death split and report amounts on the proper return.

Process & Timing

1. Who files: Executor. Where: IRS (Form 1040 for decedent; Form 1041 for estate) and NC Department of Revenue (Form D-400 for decedent; Form D-407 for estate). What: Obtain an estate EIN (IRS online), open an estate brokerage/bank account, and ensure 1099s issue to the correct TIN. When: Decedent’s final 1040/D-400 due by April 15 of the year after death; Form 1041/D-407 due the 15th day of the fourth month after the estate’s fiscal year ends (use Form 7004 and D-410P for extensions).
2. Retitle or open the brokerage account under the estate’s EIN and request consolidated 1099s showing post‑death income and any 1099-B for sales. Brokers often need Letters and EIN; processing can take days to a couple of weeks.
3. Prepare and e-file (if available) 1041 and D-407; issue Schedule K‑1s to beneficiaries for any distributed income. Maintain records to support the date‑of‑death split between the decedent’s return and the estate return.

Exceptions & Pitfalls

• 1099s in the wrong name/TIN: If post-death income was reported to the decedent’s SSN, request corrected 1099s or keep clear records allocating income at the date of death to avoid IRS/NC mismatch notices.
• Distributions change who pays: If the estate distributes current income, beneficiaries may owe the tax on their shares (via Schedule K‑1); if income is retained, the estate pays.
• Fiscal year choice: Electing a fiscal year can smooth timing of income and deductions; mark the calendar because the due date depends on that election.
• NC filing trigger: If a federal 1041 is required and the estate has NC-source income or income for the benefit of an NC resident, file D-407 even if no tax is due.
• Estimated tax after year 2: Estates often must make federal estimated payments in taxable years ending two or more years after death; monitor to avoid penalties.

Talk to a Probate Attorney

If you’re dealing with splitting pre‑ and post‑death income and getting the right forms filed for an estate, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.