Accounting, Payroll & Pension Issues/W2 Deductions for deceased employee


QUESTION: We have online employees in California that did work for us last year, and we agreed to pay them in installments as W-2 for $200/month for the next 3 years. Some of them passed away and notified us to stop sending checks, so we gave them the lump sum. My question :

1) If the family of the deceased notified social security about the death, will social security notify us to stop deducting social security from the monthly checks we send  and this will be our flag to pay the lump sum to the family ?

2) If this is not the case, how is this being addressed in the industry ?

The old fashion way is to have the survivors notify the employer ( us ), but i'm not sure if there's a more automated efficient way. How would we catch deceased recipients who do not contact us that the person is deceased during the installed payments ?

Thank you in advance!

ANSWER: Social Security will not notify you of a death of an employee.  

I do not know how you will catch someone that doesn't notify you if the person is deceased. If you file the W-2 at the end of the year and the person is deceased you should get a notice saying that the social security number  on the W-2 is not active.

What we ask if someone is deceased and taking over the other's account is that the person in the estate with power of attorney send us a copy of the death certificate and a copy of their power of attorney. We ask the power of attorney so there is not fighting among other members of the estate as to whom we send the remaining check.


---------- FOLLOW-UP ----------

QUESTION: Thank you for the reply. So the only way is if we send a copy of the W2 to the SSA at the end of the year and they reply that the SS# is invalid ?
Would it show the date the person was deceased so we can prorate the lump sum ? It looks like its the only way. Do you know if this is an industry standard and how accurate would this process be ?

Thanks in advance!

no dates they will send you a letter that the ss number
on the w-2 is invalid.  they will also charge you 50.00 for each wrong number on the W-2 forms. you will have to write them a letter explain why the number is wrong and they will waive the fees.

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR


I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.


25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.


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P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

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