Filing Taxes for the Deceased: A Guide for the Recently Departed

Death and taxes are two of life's certainties. But what happens when those two things collide?

With decades of experience in taxes for expatriates, I'm here to guide you through the process of filing taxes for the deceased. The process that factually is not as grim as it sounds. In fact, with a little bit of planning and organization, filing taxes for the deceased can be a straightforward process.

So, step by step. 

But first - 

Understanding the Tax Return - A “Prephase”

There are two types of tax returns that may need to be filed for a deceased individual:

1. a final tax return and
2. a regular tax return.

A final tax return is filed for the year in which the individual passed away, and covers the period from January 1st of that year until the date of death. This tax return will include all income received by the deceased up until the date of death, as well as any deductions and credits that apply.

A regular tax return may need to be filed if the deceased's income exceeded certain thresholds in previous tax years. In this case, the tax return will cover the entire year and will include all income received by the deceased during that time.

1. Determining If a Final Tax Return Is Required

The first step in filing taxes for the deceased process is determining if a final tax return is required.

A final tax return is required for the year of death if the deceased person received income during that year that was not reported on a previous tax return. This includes income from sources such as wages, self-employment, pensions, and investments.

If the deceased person was married, the surviving spouse may be able to file a joint return for the year of death. This can often result in a lower tax liability than filing separately.

2. Determining Responsibility

The next step is determining who is responsible for the task.

If the deceased had a will, the executor of the estate is responsible for filing the taxes. If there is no will, the court will appoint an administrator to handle the deceased's affairs, including filing taxes.

If you're not sure who is responsible for filing the taxes, don't hesitate to seek guidance from a tax professional or attorney.

NB! It's crucial to ensure that the right person takes on this responsibility, as failing to file taxes can result in legal issues and penalties.

3. Obtaining the Necessary Information

Once it's determined that a final tax return is required, the next step is to gather the necessary information. This includes:

• The deceased person's Social Security number;
• Records of income received during the year of death;
• Records of any deductions or credits that may apply;
• Any relevant tax forms, such as W-2s or 1099s.

If the deceased kept good records, this information may be readily available. If not, it may be necessary to contact employers, financial institutions, or other sources to obtain the necessary information.

4. Filing the Final Tax Return

Once all the necessary information has been gathered, it's time to file the final tax return. This can be done using Form 1040, the same form used for regular tax returns. The final tax return should be marked as "final" at the top of the form, and should be signed by the deceased person's personal representative, such as an executor or administrator.

If the deceased owed taxes, the personal representative should pay the tax liability from the deceased person's assets. If the deceased person is owed a refund, the personal representative may be able to claim the refund on the final tax return.

5. Estate Tax Returns

In addition to the final income tax return, it may be necessary to file an estate tax return if the deceased person's estate is valued above a certain threshold. The estate tax return is filed using IRS Form 706, and is due nine months after the date of death.

The estate tax return is used to calculate and pay any estate taxes owed by the deceased person's estate. The estate tax is based on the value of the estate at the time of death, and can be a significant expense for larger estates.

6. Seeking Professional Assistance

Filing taxes for the deceased can be a complex process, especially if there are multiple sources of income or a large estate to consider. As a result, it's often a good idea to seek professional assistance from a tax expert or accountant.

A tax pro can help ensure that all the necessary forms are filed correctly and on time, and can provide guidance on tax planning strategies that can minimize tax liabilities for the deceased person's estate and beneficiaries.
 

Bonus - Deductions and Credits

When preparing the tax return, it's important to be aware of any deductions and credits that may be available to reduce the tax liability.

For example, medical expenses related to the deceased's final illness may be deductible, as well as any charitable contributions made on behalf of the deceased.

NB! In addition, it's important to consider any potential tax credits, such as the Earned Income Tax Credit or the Child Tax Credit, which can help reduce the overall tax liability.

To Sum Up

As you can see, filing taxes for the deceased is not as daunting as it may seem. With the right information, organization, and expert assistance, you can ensure that the deceased person's tax affairs are handled in a responsible and timely manner.

So, take the time to review your estate plan and ensure that everything is in order. And if you have any questions, don't hesitate to reach out to a tax pro for guidance.

FAQ

1. What happens if you don't file taxes for the deceased?

Well, if you forget to file taxes for someone who passed away, there could be some pretty serious consequences. The IRS may slap you with penalties and even take legal action if the deceased person owed taxes.

Plus, not filing a tax return can hold up the process of settling the estate and distributing assets to the heirs.

2. Should a tax return be filed for a deceased person?

Yes, you do. If the deceased person earned income or owned assets that generated income during the tax year, you'll need to file a final tax return on their behalf.

Typically, the executor or personal representative of the deceased person's estate takes care of this. Just remember, the tax return should cover the period from the beginning of the tax year up to the date of the person's death.

3. Can you file taxes electronically for a deceased person?

Nope, sorry! You can't file taxes electronically for someone who has passed away. The final tax return for a deceased person must be filed on paper and sent to the right IRS office.

Don't forget to include a statement at the top of the return that indicates it's the final tax return for the deceased person.

4. Who gets the tax return of a deceased person?

The tax refund for a deceased person will usually go to the executor or personal representative of the deceased person's estate. If there is no executor or personal representative, then the surviving spouse or the next of kin may receive the refund.

If the deceased person was owed a refund, it will typically be issued to the estate and distributed according to the terms of the will or state law.