As a survivor, executor or administrator of an estate, you are obligated to file an income tax return reporting all the deceased’s income up to his or her date of death.
IRS Tax Forms Needed
Form 1040 is used to file the decedent’s final tax return. If there is a surviving spouse, s/he can file a joint return in the year of death regardless of the date of death. If there is no surviving spouse, then IRS Form 56, Notice Concerning Fiduciary Relationship, needs to be attached to the Form 1040 letting the IRS know who the responsible person is for filing the final income tax return of the deceased.
The person responsible for preparing the final tax return will need to obtain the normal tax return documents, such as W-2s and 1099s ( to report such items as dividends, interest, pensions, IRA distributions, social security benefits, etc.). A good starting point is to review the prior year’s tax return to see what sources of income were reported.
Armed with IRS Form 2848, the preparer should also obtain wage and income transcripts from the IRS to ascertain what sources of income the IRS is showing in its records. Unfortunately, it can take a few months after the calendar year end before the IRS’s computers will have this information available. Accordingly, the person responsible for preparing the returns should file IRS Form 4868 requesting an automatic six-month extension to file the return.
In addition to obtaining the wage and income transcript from the IRS for the year of death, the responsible party should obtain the IRS transcripts for the preceding six years. If you, as a responsible party, find that the deceased hadn’t filed in previous years, you are responsible for taking care of those returns as well.
If the final tax return shows a refund due the taxpayer, the overpayment of taxes may be claimed by using IRS Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer.
Other Forms Possibly Needed
It is generally a good practice to ask for multiple copies of the death certificate. In addition, multiple copies of the short certificate may be needed. Under Pennsylvania law, a “short certificate” is a Court document demonstrating that you have been appointed by the Probate Court (issued by Register of Wills) to administer a deceased individual’s affairs. A short certificate may be needed for a fiduciary to transfer the deceased’s assets to the administrator of the estate.
If Payment is Due with the Form 1040 Filing
If tax is due, submit payment with the return. You may want to use the “Make a Payment” option on the IRS website for such other payment options as a debit card, credit card or electronic funds transfer. If you are unable to pay the amount due immediately, you may qualify for a payment plan or installment agreement.
Keep in mind that if an extension of time to file (Form 4868) is made, it does not extend the time to remit payment. That due date is normally April 15. Accordingly, it is best to estimate the tax that is due and remit that payment on or before the April 15 due date. If additional monies are due to pay the tax liability, request those funds from the estate of the deceased.
IRS Form 1041
IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, is used to report income earned by the deceased after the date of death. Forms 1099 showing interest and dividend income, gross proceeds from sale of stock, etc., are issued on a calendar year basis. When reporting this income on Form 1040, only the amounts earned by the deceased between January 1 and the date of death get reported on Form 1040. Any income earned after the date of death gets reported on Form 1041. Thus, the responsible person preparing the final Form 1040 needs to identify and report the income earned before date of death on Form 1040, and the income earned after the date of death on Form 1041.
Read IRS Publication 559, “Survivors, Executors and Administrators,” for more information about requirements.
Consider engaging an estate tax attorney regarding probate and executor responsibilities and a tax professional to bring closure to the IRS filing requirements of the deceased individual.
Short certificates demonstrate that you have opened an estate for an individual who has died–and opening an estate comes with obligations. Often, a bank or third party creditor will tell a potential executor they should go down to the courthouse and sign up for one without any concern about the obligations such a certificate places on the executor. Once you swear in to probate an estate, you are obligated to administer the estate according to law, to ensure that the law is followed to the letter, and that debts are paid in the appropriate order. This is a good example of why consulting with an estate attorney is important.
While this post focused exclusively on the federal issues related to a deceased individual, there are usually state forms that also need to be filed and need to be addressed.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.