Difference between revisions of "File Taxes for a Deceased Person"
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It's said that the only sure things are death and taxes, but even death doesn't save a person from having to pay taxes. If you're the executor of a deceased person's estate, your responsibilities include filing that person's final personal tax return. You might also need to file a separate estate return for income received after the person's death. | It's said that the only sure things are death and taxes, but even death doesn't save a person from having to pay taxes. If you're the executor of a deceased person's estate, your responsibilities include filing that person's final personal tax return. You might also need to file a separate estate return for income received after the person's death. | ||
| − | [[Category:Taxes and Fees]] | + | [[Category: Taxes and Fees]] |
== Steps == | == Steps == | ||
===Collecting the Necessary Information=== | ===Collecting the Necessary Information=== | ||
| − | #Collect the person's income reporting forms. Gather the income reporting forms that have been mailed to the deceased person, called the decedent. This includes W-2s, 1099s and interest statements. These forms are usually sent after January 31 for the previous year and should arrive by the end of February. If you aren't sure you have all the necessary forms, submit an information request to the IRS to obtain all tax forms for the decedent. You will need the following to make a request:<ref>http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Getting-Information-from-the-IRS</ref> | + | #Collect the person's income reporting forms. Gather the income reporting forms that have been mailed to the deceased person, called the decedent. This includes W-2s, 1099s and interest statements. These forms are usually sent after January 31 for the previous year and should arrive by the end of February. If you aren't sure you have all the necessary forms, submit an information request to the IRS to obtain all tax forms for the decedent. You will need the following to make a request:<ref name="rf1">http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Getting-Information-from-the-IRS</ref> |
#*The decedent’s complete name, address and social security number | #*The decedent’s complete name, address and social security number | ||
#*A copy of the death certificate | #*A copy of the death certificate | ||
| − | #*Either IRS Form 56, Notice Concerning Fiduciary Relationship (notifying the IRS that the surviving spouse, executor or guardian will stand in the position of the taxpayer)<ref | + | #*Either IRS Form 56, Notice Concerning Fiduciary Relationship (notifying the IRS that the surviving spouse, executor or guardian will stand in the position of the taxpayer)<ref name="rf1" /> or a copy of Letters Testamentary approved by the court (which grants the personal representative of the deceased the authority to manage his or her affairs). |
| − | #*To get a copy of the person's previous tax returns, use IRS Form 4506, Request for Copy of Tax Return.<ref>https://sa.www4.irs.gov/irfof-tra/start.do;jsessionid=0ROuMnSG4+6WrX5SqlW5uzkt</ref> | + | #*To get a copy of the person's previous tax returns, use IRS Form 4506, Request for Copy of Tax Return.<ref name="rf2">https://sa.www4.irs.gov/irfof-tra/start.do;jsessionid=0ROuMnSG4+6WrX5SqlW5uzkt</ref> |
#Decide whether to file a joint return. If the decedent was married at the time of death, a joint tax return may be filed for that tax year. Either the spouse of the decedent or the executor may fill out and file the return. A full standard deduction may be claimed, and joint-return rates used. | #Decide whether to file a joint return. If the decedent was married at the time of death, a joint tax return may be filed for that tax year. Either the spouse of the decedent or the executor may fill out and file the return. A full standard deduction may be claimed, and joint-return rates used. | ||
#*If an executor is involved, he or she must sign the return along with the surviving spouse. | #*If an executor is involved, he or she must sign the return along with the surviving spouse. | ||
| − | #*The return should be signed with a note that reads "filing as surviving spouse" in the space for the decedent's signature.<ref>https://turbotax.intuit.com/tax-tools/tax-tips/Family/Death-in-the-Family/INF12090.html</ref> | + | #*The return should be signed with a note that reads "filing as surviving spouse" in the space for the decedent's signature.<ref name="rf3">https://turbotax.intuit.com/tax-tools/tax-tips/Family/Death-in-the-Family/INF12090.html</ref> |
#Change the ownership of all accounts. For accounts such as mutual funds and bank accounts, change the ownership to your name as the executor. Do this as quickly as possible after the person's death, so that the 1099 income report shows the correct amount of income assigned to the decedent (rather than showing interest or other income earned after the date of death). If the 1099 shows more income than it should, report the entire amount on Schedule B of the return, and deduct the amount that should be reported separately by the estate (the amount earned after the person's death). | #Change the ownership of all accounts. For accounts such as mutual funds and bank accounts, change the ownership to your name as the executor. Do this as quickly as possible after the person's death, so that the 1099 income report shows the correct amount of income assigned to the decedent (rather than showing interest or other income earned after the date of death). If the 1099 shows more income than it should, report the entire amount on Schedule B of the return, and deduct the amount that should be reported separately by the estate (the amount earned after the person's death). | ||
===Filing the Final Personal Tax Return=== | ===Filing the Final Personal Tax Return=== | ||
#Calculate the person's reportable income. Income earned between the start of the year and the date of the person's death should be reported on the final tax return. Any income earned after the person's death is considered the estate's income, and if it's more than $600 you will also need to file a tax return for the estate (Form 1041, Income Tax Return for Estates and Trusts). | #Calculate the person's reportable income. Income earned between the start of the year and the date of the person's death should be reported on the final tax return. Any income earned after the person's death is considered the estate's income, and if it's more than $600 you will also need to file a tax return for the estate (Form 1041, Income Tax Return for Estates and Trusts). | ||
| − | #[[Fill out IRS Form 1040 | Fill out Form 1040 for the decedent]]. List income, exemptions and deductions just as you would for yourself. You can itemize deductions on Schedule A that the deceased person incurred before death, but none that occurred after. If you choose not to itemize, you can take the full standard deduction.<ref>http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Filing-the-Final-Returns-of-a-Deceased-Taxpayer</ref> The form must be filed on or before April 15 of the year following the person's death. | + | #[[Fill out IRS Form 1040 | Fill out Form 1040 for the decedent]]. List income, exemptions and deductions just as you would for yourself. You can itemize deductions on Schedule A that the deceased person incurred before death, but none that occurred after. If you choose not to itemize, you can take the full standard deduction.<ref name="rf4">http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Filing-the-Final-Returns-of-a-Deceased-Taxpayer</ref> The form must be filed on or before April 15 of the year following the person's death. |
#*If the decedent didn't file taxes in the years preceding his or her death, you may have to file individual incomes for those years as well. Look for IRS correspondence in the decedent's personal records or look through the person's checkbook for evidence of refunds or payments to the U.S. Treasury. | #*If the decedent didn't file taxes in the years preceding his or her death, you may have to file individual incomes for those years as well. Look for IRS correspondence in the decedent's personal records or look through the person's checkbook for evidence of refunds or payments to the U.S. Treasury. | ||
| − | #*If the decedent is due a refund, claim it using Form 1320, Statement of a Person Claiming Refund Due a Deceased Taxpayer.<ref>http://www.irs.gov/uac/Form-1310,-Statement-of-Person-Claiming-Refund-Due-a-Deceased-Taxpayer</ref> | + | #*If the decedent is due a refund, claim it using Form 1320, Statement of a Person Claiming Refund Due a Deceased Taxpayer.<ref name="rf5">http://www.irs.gov/uac/Form-1310,-Statement-of-Person-Claiming-Refund-Due-a-Deceased-Taxpayer</ref> |
#Write the word "deceased" across the top of Form 1040. Include the decedent's name and the date of death. You will also write the word "deceased" (or, if you're the spouse, "filing as surviving spouse") in place of the person's signature at the bottom of the form. This will make it immediately clear to the IRS that the tax form is being filed for someone who is deceased. | #Write the word "deceased" across the top of Form 1040. Include the decedent's name and the date of death. You will also write the word "deceased" (or, if you're the spouse, "filing as surviving spouse") in place of the person's signature at the bottom of the form. This will make it immediately clear to the IRS that the tax form is being filed for someone who is deceased. | ||
===Filing the Estate Tax Return=== | ===Filing the Estate Tax Return=== | ||
#Collect information needed to file estate taxes. When a person dies, a new estate comprised of that person's assets is automatically formed. If the estate generates more than $600 in annual gross income, a separate tax form must be used to file estate taxes, in addition to personal income taxes. In order to file estate taxes for the decedent, do the following: | #Collect information needed to file estate taxes. When a person dies, a new estate comprised of that person's assets is automatically formed. If the estate generates more than $600 in annual gross income, a separate tax form must be used to file estate taxes, in addition to personal income taxes. In order to file estate taxes for the decedent, do the following: | ||
| − | #*[[Obtain a Tax ID Number for an Estate | Obtain a tax ID number for the estate]]. This is also called an "employer identification number," or EIN. You can apply for a number online or via fax for mail.<ref>http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN</ref> | + | #*[[Obtain a Tax ID Number for an Estate | Obtain a tax ID number for the estate]]. This is also called an "employer identification number," or EIN. You can apply for a number online or via fax for mail.<ref name="rf6">http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN</ref> |
#*Calculate the annual income from the decedent's assets. Assets include savings accounts, CDs, bonds, stocks, rental property, and any other income accrued after the person's death. | #*Calculate the annual income from the decedent's assets. Assets include savings accounts, CDs, bonds, stocks, rental property, and any other income accrued after the person's death. | ||
| − | #Fill out form 1041 to file estate taxes. Form 1041, US Income Tax Return for Estates and Trusts, is the form you need to report income, gains, losses, etc., related to the decedent's estate.<ref>http://www.irs.gov/uac/About-Form-1041</ref> The form must be filed on or before April 15 of the year following the person's death. | + | #Fill out form 1041 to file estate taxes. Form 1041, US Income Tax Return for Estates and Trusts, is the form you need to report income, gains, losses, etc., related to the decedent's estate.<ref name="rf7">http://www.irs.gov/uac/About-Form-1041</ref> The form must be filed on or before April 15 of the year following the person's death. |
#*A decedent's estate figures its gross income the same way an individual would; however, a decedent's estate is allowed an income distribution deduction for distributions to beneficiaries. For example, a 401K plan might have designated the person's wife as the beneficiary.These are reported on Schedules K-1 on form 1041. | #*A decedent's estate figures its gross income the same way an individual would; however, a decedent's estate is allowed an income distribution deduction for distributions to beneficiaries. For example, a 401K plan might have designated the person's wife as the beneficiary.These are reported on Schedules K-1 on form 1041. | ||
| − | #*If more time is needed, you may apply for a five-month extension using IRS Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.<ref>http://www.irs.gov/uac/About-Form-7004</ref> | + | #*If more time is needed, you may apply for a five-month extension using IRS Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.<ref name="rf8">http://www.irs.gov/uac/About-Form-7004</ref> |
#Use Form 706 to report a transfer of assets. Form 706, United States Estate (and Generation Skipping Transfer) Tax Return, is used to report the transfer of assets (such as a house or stock) from the decedent to heirs or beneficiaries. Be sure to fill out and submit this separate form if a transfer of assets has taken place. | #Use Form 706 to report a transfer of assets. Form 706, United States Estate (and Generation Skipping Transfer) Tax Return, is used to report the transfer of assets (such as a house or stock) from the decedent to heirs or beneficiaries. Be sure to fill out and submit this separate form if a transfer of assets has taken place. | ||
| − | #Apply for a Certificate of Discharge before selling property. Before you sell the decedent's house or other property, it's necessary to request a Certificate of Discharge from a Federal Tax Lien.<ref>http://www.irs.gov/pub/irs-pdf/p783.pdf</ref> This releases the property from the automatic federal tax lien that is attached to a person's estate the day he or she dies. The property cannot be sold until the lien has been removed. In order to apply, you will need:<ref>http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Selling-Real-Property-that-is-Part-of-the-Decedents-Estate</ref> | + | #Apply for a Certificate of Discharge before selling property. Before you sell the decedent's house or other property, it's necessary to request a Certificate of Discharge from a Federal Tax Lien.<ref name="rf9">http://www.irs.gov/pub/irs-pdf/p783.pdf</ref> This releases the property from the automatic federal tax lien that is attached to a person's estate the day he or she dies. The property cannot be sold until the lien has been removed. In order to apply, you will need:<ref name="rf10">http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deceased-Taxpayers-Selling-Real-Property-that-is-Part-of-the-Decedents-Estate</ref> |
#*The inventory and appraisement of the estate assets | #*The inventory and appraisement of the estate assets | ||
#*Copy of the will | #*Copy of the will | ||
