Taxes are not likely to be the first thing that comes to mind when someone passes, but there are tax matters that need to be addressed. If you are the personal representative of the estate (such as an executor, administrator, or a surviving spouse), then it is your responsibility to tie up the loose ends, including the deceased’s final tax return. Here’s everything you need to know about how to file a final tax return after someone dies, according to the IRS.
*Note: Tax laws change, and the following information may not reflect recent changes. This information is current as of September 2019.
The Final Tax Return
After someone dies, the personal representative of the estate (that could be an executor, administrator, or anyone else in charge of the decedent’s property) is responsible for filing any final individual income tax returns and estate tax returns of the decedent. To determine if the personal representative must prepare and file a final tax return for the deceased, they should refer to the filing requirements that apply to individuals as stated by the IRS (https://www.irs.gov/publications/p17).
Reporting Income on Taxes
According to the IRS, which income to include and the deductions to take on a final return are determined by the accounting method that the deceased used at the time of death. Most commonly, that method is the cash receipts and disbursements method.
“Under this method, the final individual return should show only the items of income the decedent actually or constructively received, that were credited to his or her account, or that were made available to him or her without restriction before death. Generally, the final individual return can claim deductions for expenses the decedent paid before death.”
If the accrual method was used by the deceased, the personal representative should refer to IRS Publication 559 (https://www.irs.gov/publications/p559) and Publication 538 (https://www.irs.gov/publications/p538) for more filing and accounting information.
How to File Taxes After Someone Passes
In regard to proper signature and notation requirements, if the personal representative is filing electronically, they should follow the software’s specific instructions.
If the personal representative is filing by paper, they must “write the word “Deceased,” the decedent’s name, and the date of death across the top of the final individual tax return. If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. If not filing a joint return, write the decedent’s name in the name field and the personal representative’s name and address in the address field.”
If the deceased is due a refund, Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer (https://www.irs.gov/pub/irs-pdf/f1310.pdf) may also need to be filed along with the final return. A surviving spouse filing jointly does not need to file Form 1310. Court-appointed or court-certified personal representatives filing an original return on behalf of the deceased are not required to file Form 1310 either. However, they must attach a copy of the court document showing the appointment to the tax return.
- “If there’s an appointed personal representative, he or she must sign the return. If it’s a joint return, the surviving spouse must also sign it.”
- “If you’re a surviving spouse filing a joint return and there’s no appointed personal representative, you should sign the return and write in the signature area ‘Filing as surviving spouse.’ A surviving spouse can file joint returns for the taxable year in which the death occurred and if the death occurred before filing the return, for the taxable year immediately before the year of death.”
- “If there’s no appointed personal representative and there’s no surviving spouse, the person in charge of the decedent’s property must file and sign the return as ‘personal representative.’”
Additional Filing Options
To determine if the law requires filing Form 1041, refer to the IRS Form 1041 Instructions (https://www.irs.gov/pub/irs-pdf/i1041.pdf), and to determine if the deceased’s estate must file Form 706, refer to the IRS Form 706 Instructions (https://www.irs.gov/pub/irs-pdf/i706.pdf) for more information.
Filing taxes for someone who has died can be incredibly stressful and complicated. If a loved one has recently died and you are not sure how to properly file their final tax return, consult with an experienced accountant. A qualified professional, like Marcia Campbell, CPA, can help you navigate complex tax laws to ensure a smooth transition of assets. Contact us at (951)686-3608 to find out how we can help.