Death of a Taxpayer
By Michael Aston, E.A.
Alhambra Tax Center
When a taxpayer dies, there are certain returns that still need to be filed a responsibility that falls onto the personal representative.
Duties of Personal Representative – Duties include collecting all of the decedent’s property, paying any creditors and distributing assets to beneficiaries. In addition, the representative is responsible for filing various tax returns and seeing that the taxes owed are properly paid.
No Court-Appointed Representative – When there is not probate and no appointed representative, the IRS will allow a “person charged with property of the descendant” to file the decedent’s income tax returns and claim refunds. IRS written guidance does not specify who this person should be. If there is a surviving spouse, he or she usually files a joint final Form 1040 and any other required returns. If there is no surviving spouse, the person who files commonly:
· The trustee of the decedent’s revocable trust.
· The personal representative nominated in the will who would have been appointed if probate was required.
· A beneficiary receiving non-probate assets who undertakes the work.
The IRS uses the term “personal representative” to refer to anyone filing for a decedent, whether or not court appointed.
Decedent’s Tax Returns – The personal representative is responsible for the following returns when required:
· Form 1040. Final return for the year of death (gross income of a decedent from January 1 until the date of death is reported on the decedents final income tax return).
· Form 1041. Income tax return for a trust or other probate activities. (Required if income greater than $600 is received after death by the decedent’s estate).
· Form 706. Estate tax return (required if the decedent’s estate exceeds the estate tax exclusion (currently $11,700,000 in 2021).
· Form 709. Gift tax for year of death (required if the decedent gave more than the annual exclusion to any one person on the year of death or failed to file any prior year gift tax returns).
· Returns not filed by decedent for prior years – Form 1040, Form 1040-X or Form 706.
· State income tax and estate tax return. Some states do not have an estate tax, but several states have annual state tax exclusions that significantly less than the federal exclusion.
A personal representative may be personally liable for unpaid tax if he or she distributed assets, the estate is solvent as a result and the personal representative had notice of the tax claim.
For more information you can contact your tax preparer, irs.gov or ftb.ca.gov. This information is from Tax Material, Inc.