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Learn what taxes need to be filed on behalf of the Deceased after death at mywyaforward.com

Taxes

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Filing Federal & State Taxes

There are a number of tax laws and regulations that may be applicable when handling the affairs of a Deceased. One of the most common issues, when finalizing the probate of their estate, is filing the Deceased’s last tax return. Read on for resources for both  Federal and State returns.

Federal Tax Returns

The Personal Representative (PR) of the estate is required to complete and file the tax return for the Deceased and the Deceased’s estate. This could also include filing missing tax returns from previous years if needed. Some tips:

  • The requirements and procedures to file Federal taxes are available for each tax year from the Internal Revenue Service (IRS). Generally published on the IRS’ web site and in tax forms available in the community, they determine whether or not a return must be filed for the Deceased based on age, filing status and gross income.
  • In addition, the PR will file Form 56, Notice Concerning Fiduciary Relationship, which notifies the IRS of the death and who will be responsible for filing the return for the Deceased.

Please Note: When filing the return, write “deceased” after the Deceased’s name and also provide the date of death at the top of the tax return.

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Deductions / Gifts

According to the IRS, the accounting method the Deceased used will determine whether or not deductions are taken on the final return. Information about deductions:

  • The IRS notes that most people use the cash method of deductions and that the final return shows only the income the Deceased received before death. This includes income credited to the Deceased’s account or funds that were “made available to him without restriction” before death.
  • The IRS has specific directions for filing taxes where the Deceased used the accrual method. These are available on their Web site or by calling 1-800-829-1040.
  • Expenses paid before death should be deducted.
  • Finally, other issues may need to be addressed including accounting for taxable gifts. If the Deceased employed an accountant to handle their taxes, you may want to speak with them for assistance. Again, help can also be sought by calling the IRS at 1-800-829-1040.

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Who Signs the Return?

  • The person serving as PR needs to sign the return.
  • If filing a joint return, the spouse and the PR must sign the return.
  • If filing a joint return, but there is no PR for the estate, the IRS states that the surviving spouse must write “filing as surviving spouse” in the signature area after signing the return.
  • Similarly, if one is serving as PR but wasn’t appointed by the court, and there is no surviving spouse, the person handling the estate needs to write “serving as personal representative” in the signature area after signing the return.
  • If you are serving the Deceased in another capacity, such as executor, write that title next to your name in the signature area of the form.

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Additional Forms Needed

Additional forms (Form 1041 and Form 706) may need to be filed depending on the estate.

  • Form 1041 is the U.S. Income Tax Return for Estates and Trusts form. The instructions within the form will help you determine if it needs to be filed.
  • Form 706, United States Estate (and Generation Skipping Transfer) Tax Return, might also need to be filed. Similarly, refer to the instructions to determine if the estate qualifies.

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Tax Refunds

If the Deceased is entitled to a tax refund, there is another form (Form 1310) that may need to be completed. However, the form is not needed if:

  • You are a spouse and are filing jointly with the Deceased.
  • You were appointed by the court or are a certified representative. (In this case, you would need to attach a copy of the court certificate which verifies the appointment.)

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Due Date

The tax forms are due on April 15 of each year. (For example the Deceased’s 2008 tax forms are due on April 15, 2009.) Most PRs file single tax returns right away rather than waiting for the spring deadline. Even so, you may find that you need more time to prepare the return. In that case, request an extension from the IRS.

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State Tax Returns

If filing a federal tax return for the Deceased, you may also need to file a state tax return. Many states have their own estate taxes, so this step can be important in cases of large estates.

When filing, use the same status that was used on the federal return (e.g., joint, individual). As in the case of the federal return, the PR or other representative must file the return and sign it even if filing jointly with the spouse. Check with the state tax laws for the Deceased’s state about how to specifically denote that you are filing on behalf of the deceased. Please Note: The instructions are different for each filing status (whether married but filing separately; filing jointly; if you are a dependent and there is no surviving spouse, etc.) Be sure to look up your state’s tax laws as these can vary greatly by state.

Example: When filing an individual return for a deceased individual in Minnesota, you would put both of your names and contact information on the form. Then you’d put DECD and the date of death after the Deceased’s name, sign the return as Personal Representative (just like you would for the federal return) and attach the appropriate document to prove your status as PR.

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