It's said that the only sure things are death and taxes, but even death doesn't save a person from having to pay. If you're the executor of a deceased person's estate, your responsibilities include filing that person's final personal income tax return. You might also need to file a separateincome tax return for income received by the deceased person's estate after their death.
Additionally, if the deceased person's estate was substantial, you may also need to file an estate tax return. Estate tax is a tax computed on the total value of the person's estate as of the date of their death, and is different and separate from income tax.
In general, the final individual income tax return of a decedent is prepared and filed in the same manner as when they were alive. All income up to the date of death must be reported and all credits and deductions to which the decedent is entitled may be claimed. Only income earned between the beginning of the year and the date of death should be reported on the final return.
If the decedent has not done so, you may have to file individual income tax returns for years preceding the year of death. If you learn the decedent has not filed required returns, you may obtain verification of non-filing and certain income documents of the decedent from the IRS.
If tax is due on the decedent’s individual income tax return for the year of death, or on any returns you file for preceding years, you may submit payment with the return or see Make a Payment for other payment options, including payment by debit card, credit card or electronic funds transfer. If you can't pay the amount due immediately, you may qualify for a payment plan or installment agreement.
If the decedent is due a refund of any individual income tax (Form 1040), you may claim that refund using IRS Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer.
A death in the family can be a heartbreaking time. Your first step should be completing the IRS “How Do I File a Deceased Person's Tax Return?” survey. This will help provide answers to some basic questions about your filing requirements. However, there are many things to consider such as retirement accounts, inheritance tax and social security benefits that may require a professional tax advisor to ensure you’re completing the correct forms and don’t end up with a large tax debt.
William D. Truax and his friendly team of Enrolled Agents (EAs) and licensed tax preparers have been helping individuals handle estate taxes and decedent filings for over 30 years. He is licensed to represent taxpayers before the IRS and is also a member of the Bar of the United States Tax Court.
If you need assistance or have questions about paying the taxes of a deceased loved one, please contact us today for a FREE consultation. The longer you wait, the more you may owe!