If you’re responsible for filing the final estate tax return of a deceased loved one, you need to know how it works. You will likely need to file more than once, depending on the amount of income the estate earns, and you may need to do so in a timely manner. This article covers what to expect from the process, who is responsible for filing, and some tips for getting the job done quickly.
The executor of the estate, or a personal representative named by the deceased, is responsible for filing the final income tax return. This person is typically a family member or close friend, but it could also be the deceased’s accountant. If neither of these people is available, the deceased’s spouse or child can serve as executor or personal representative.
A personal representative can get help from a professional accountant or estate attorney to ensure they are doing things correctly. While this is not required, it can help ensure the returns are filed properly and that no errors are made.
How to File a Final Estate Tax Return
Once the estate’s assets are distributed to the beneficiaries, it is time to file an estate income tax return. This form, Form 1041, is used to report income generated by the estate, such as earnings from investments or payments from insurance companies. In most cases, you will only need to file Form 1041 if the estate generates $600 or more in income each year, or if the beneficiary is a nonresident alien.
When to File Form 1041
To determine when a tax return needs to be filed, first gather all of the deceased’s financial information and personal information, such as bank statements, retirement account statements, W-2s and Social Security number. You can also request a transcript of the deceased’s previous tax returns by submitting Form 4506-T.
Once you have all of this information, you can start preparing the final estate tax return. Make sure you write “DECEASED:” at the top of the return, along with the deceased’s name and date of death. You will also need to apply for a federal tax ID number, known as an employer identification number (EIN), for the estate. This number will be used on all income tax returns and other documents filed for the estate. It will also need to be provided to payers of interest and dividends, such as banks, to identify the estate as a unique taxpayer.
You can file the tax return either by mail or electronically using free online software, such as Rocket Money. It is recommended to file the return electronically to minimize the chance of any errors being made.
Filing an estate tax return can be a complicated process, and it is important to follow all of the guidelines set out by the IRS. To avoid any confusion or delays, it is best to consult with an estate planning lawyer or tax professional. This way, you can be sure that your loved one’s wishes are being honored and that any taxes owed are being paid correctly.