In the event that a person earns income in the year of their death, the personal representative or executor of their estate is usually responsible for filing that person’s final income tax returns.
In some cases, the surviving spouse is the one who files the final income tax returns if previously, they filed joint accounts.
If you’re the personal representative or executor of an estate and are responsible for filing income tax returns for the decedent, other than a few differences, it can be done using essentially the same procedures and forms used to file your own tax returns.
Here’s a complete guide to filing income tax returns for a decedent.
1. Download Appropriate Forms.
With both state and federal income tax returns for a decedent, you’ll usually need the same forms required for regular individual tax returns, but it must be indicated the taxpayer is deceased.
When filing federal income tax returns for a decedent, you’d use Form 1040 or Form 1040-ED if they qualified. The forms can be found on the IRS website or the state tax authority of the state where the decedent resided.
If the decedent happened to be self-employed or operated a business as a sole proprietor, their tax returns might be a little more complex than most individuals.
You may need to seek a tax professional. You can learn more about finding one at this link: taxfyle.com.
2. Verify Tax Information.
Before filing income tax returns for a decedent, you should know what their tax status was, and be sure they didn’t fail to file tax returns in any previous year of their life.
As a personal representative or executor of the decedent’s estate, you’re responsible for filing any missing returns and the return for the year of the decedent’s death.
You can possibly find information about whether the person’s taxes were up to date by looking through their financial documents. Transcripts can also be requested from the IRS.
Additionally, you can contact the state’s Department of Revenue to know if the decedent’s state taxes are up to date.
3. Gather Income Documents.
When completing a decedent’s income tax returns, you’ll need all documents with the state and the IRS.
These documents can include W-2s, which show the income earned by the decedent, along with federal and state taxes withheld.
These forms can be verified with the IRS by filing the same form needed to request transcripts of the decedent’s past tax returns.
The decedent’s employers need to be notified of the death as soon as possible, so the income can be recorded and reported correctly.
Income documents can usually be found by looking for the decedent’s financial records or personal files.
4. Fill Out Federal and State Income Tax Returns.
After all documents and income information is gathered, you can fill out the state and federal income tax returns of the decedent. You should be mindful that some states might require you to file paper forms.
You can check with the state’s Department of Revenue before deciding to do the forms electronically.
The decedent’s social security number will be used on these tax forms, since these are personal income tax returns for income that was earned while they were alive.
You should also be aware that depending on the date of the decedent’s death, you might need to file tax returns for two years.
As an example, if the decedent died on March 1 and had yet to file their taxes for the prior year, the previous year’s tax returns would need to be filed by April 15, and taxes for the decedent’s income from January 1 to March 1 would be filed the following year.
5. Finalize Forms.
Review all of the information included and double-check all calculations on the forms to ensure everything is accurate and correct before you sign them.
After you’ve finalized them, sign and date them, and indicate your relationship to the decedent. Write either “personal representative” or “executor” next to or under the decedent’s name.
Be sure to make copies of all forms for the estate’s records before sending them off to the state’s Department of Revenue or IRS.
6. Submit Forms and Supporting Documents.
A decedent’s income tax returns are due the same date as everyone else’s tax returns, usually April 15. A tax return should be filed even a return indicates the decedent doesn’t owe any taxes.
If the decedent has failed to file any tax returns in prior years, you’ll be required to file them as well. The decedent’s taxes must be up to date before distributing the estate.
A copy of the death certificate won’t be required to send with the final income tax return. Nonetheless, you should still hold on to it if you’re asked for it later for verification purposes.
Some states might require a will, a copy of the death certificate, or the court certificate which appointed you the personal representative or executor of the estate.
7. Include Payment in Full.
Taxes owed by the decedent must be paid out of the estate bank account when filing the final tax return. Even if an extension was applied for, you’d still be expected to pay estimated total taxes.
If there’s not enough money in the estate to pay the taxes in full at once, you might qualify for an installment plan with the IRS or an online payment agreement.
For you to be eligible for an online payment agreement, the decedent needs to owe less than $50,000 in total. But then, if the decedent owes more than $50,000, you might still be able to work out an installment plan.
8. Claiming Refunds
If a decedent is owed a refund on their taxes and you desire to claim that refund on behalf of the estate, you have to fill out form 1310.
You can find the form on the IRS or state’s Department of Revenue website.
When completing the form, expect to answer questions about yourself and why you’re requesting to claim the decedent’s refund for them or their estate.
You’ll have to include a copy of the court order or certificate appointing you as the personal representative or executor when mailing the form. Some states might require a copy of the death certificate as well.
Filing tax returns for a decedent can be a challenging process that takes time. Be sure to follow these tips to help make the process go as smoothly as possible.
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