When a loved one passes away, the executor of their estate must deal with many tasks that may include filing tax returns. This task typically falls to an attorney or another trusted person. If you are an estate administrator, you must file a final income tax return for the deceased, as well as any individual tax returns for beneficiaries of the estate. In addition, you may need to file a final state income tax return and a tax return for any revocable trusts that the deceased created during life. This article discusses the various types of returns that are required and how to file them properly.
A decedent’s estate is a separate taxable entity. Therefore, a death-related tax return is filed on the same form as would be used for an individual. The name of the deceased is written at the top of the return, followed by their date of death. Most deductions that are allowed to individuals are also permitted for an estate. If the deceased left any money in a savings account, checking account or other accounts, this must be reported on a final income tax return.
Estate income tax returns are based on the tax year of the deceased, which begins at the date of death. This tax return, called Form 1041, lists all the income and expenses for the deceased’s estate. This includes interest, dividends, retirement plan distributions and the proceeds from the sale of assets. The expense portion of the return consists of items such as trustee or executor fees, legal costs, accounting costs and appraisals. Depending on the size of the estate, the taxes that must be paid may be relatively small or large.
When to File the Final Estate Tax Return
The final income tax return for a deceased person can be filed at any time up to nine months after the date of death. If you need more time to complete the return, you can file for an extension using form 7004 up to six months before the original due date. However, if you extend the filing deadline, you must pay any estimated taxes that are due with the return when it is submitted.
If you have any questions about the estate income tax return, you can contact the IRS at 1-800-829-1040. You can also find the appropriate forms and instructions on the IRS website.
It is important to file the correct return to avoid an overpayment of taxes. If the tax return is not filed correctly, the administrator of the estate may be held liable for the amount in question. In addition, a delay in filing the return may result in the IRS sending a dreaded notice to the estate requesting additional information or notifying it of an error that it needs to correct. This can create delays in closing the estate and distributing the assets to beneficiaries. The administrator should keep the estate open until it receives all of the tax forms and returns from the IRS.
