Each year someone notifies us that their parent has passed away and want to know what they need to do about filing the final tax return.
When someone that has been filing as a single taxpayer dies, there are several things that need to be done. (The focus is on a single tax filer, not someone filing a joint return.)
The first thing you need to do is gather all of their tax documents. Each tax document should be clearly marked by the organization identifying whether it is for the individual or the estate. It is also common to receive two documents from each organization. Generally, this is because the income belongs to the individual taxpayer, up to the date of death. Everything after the date of death belongs to the estate or trust.
Two tax returns will be filed. The first will be the final return for the departed taxpayer. The second return is filed for the estate or trust. Just like any other 1040 return, the final tax return is due on April 15th of the following year. The estate or trust return is due at the same time as the final tax return, or up to 15 ½ months from the date of death. That date due depends upon several factors.
Keep in mind, if you were designated as the Power of Attorney (POA) prior to the taxpayer’s death, that POA is no longer valid upon the date of their death. You will need to contact an attorney to have the courts appoint a personal representative (PR) for the estate. With a PR designation, you are allowed to sign the final 1040 and the estate/trust tax returns. It will be necessary for you to provide your tax professional with PR paperwork and the death certificate.
Finally, you must keep very accurate records indicating where and why the money was spent. If you are the PR or successor trustee, you have a fiduciary liability to all the beneficiaries and the estate.
If you have questions regarding this topic, or any other tax, business, or financial questions, please feel free to contact our office.
NOTE: This information should not be considered as tax/legal advice. You should consult your tax/legal advisor regarding your own tax/legal situation.