VanAntwerp Attorneys, LLP
Phone: 606-618-0698

Filing final federal income and estate taxes for the deceased

In the aftermath of the death of a family member or loved one, there are practical matters that need attending. It is an unfortunate reality that even death does not excuse a person from filing final taxes, an unpleasant task which generally falls to the executor or a close surviving family member.

Final federalĀ incomeĀ taxes

Surprisingly, the process of filing a final federal income tax return for a deceased person is not much different from the standard process. The taxes are prepared and filed in the same manner as when the individual was living with a few exceptions.

Final income taxes are filed using the same forms, but "deceased" is written after the tax payer's name along with the date of death at the top of the tax return. The filing deadline is April 15th of the year following the tax payer's death, regardless of when the death occurred. The return is signed by the personal representative filing on the decedent's behalf. Only income from the beginning of the tax year until the death occurred must be reported.

Federal estate taxes

An estate is generally considered a separate taxable entity from the deceased, in that it exists until all assets are distributed. Any income earned by the estate's assets during the finalizing of the estate must be reported. Estates with an income of $600 or more must file an estate income tax. Income is generally calculated the same for an estate as it is for an individual. However, there are exceptions for the sale of property, administrative expenses and losses.

Apply for an EIN

Before filing, the executor must apply for an employer identification number (EIN) for the estate. An EIN is an identification number used for returns, banking and other monetary transaction for the estate. An EIN can be requested from the IRS website and is generally received immediately. Most financial institutions will require an EIN when setting up a separate bank account for the estate.

Deductions

As with a standard income tax return, the decedent is eligible for the standard deductions. Additionally, funeral expenses, charitable donations and debts the decedent owed are deductible. Also, all medical expenses paid within one year of the death can also be deducted.

The closing out of an estate is a lengthy process. An estate is not considered closed until all assets are distributed and the period of administration ended. Since the period of administration is the time actually required by the executor or personal representative to close out the estate, the exact time frame varies. Having a comprehensive estate plan and organized financial records will make the process easier for all involved.

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