After the death of a loved one, the task of filing the final personal tax return and the estate income tax return can become overwhelming.  After all, how many times have you had this responsibility?  If you are like most of our clients, this is the first time.

Here’s what you need to know:

All of your loved one’s income from January 1st  until the date of his or her death goes on the final 1040, which is filed using their Social Security number. Income from the rest of the year goes on the proper estate tax return, using its own tax ID number.

The estate either pays tax on the income shown or it issues the heirs K-1 forms to report their share of the estate’s income.  Since the income tax rates on estates are rather high, the K-1 route normally pays off.  When filing for a tax ID number, you can select a fiscal year for your loved one’s estate.  For example, if the date of death was April 1, 2012, you could select to file the return with a due date of March 31, 2012. That will push your share of the income from the estate onto your next year’s return. Otherwise, plan to pay income tax on this year’s estate income, in addition to your income.

Cruise & Associates is a Nebraska-based accounting firm that specializes in preparing individual final 1040’s, estate, and gift tax returns.  You can trust that we will make sure everything is filed correctly.

Here’s what we can do…

  • File your loved one’s final 1040 tax return
  • File all the proper estate return(s) as needed, including a 1041, 706, or 709
  • Tax planning for the income of the estate
  • Apply for the Tax Identification Number for the estate
  • Review all documents to make sure you have taken full advantage of the stepped-up basis benefits

Here’s what you get…

  • Personalized face-to-face interview with your dedicated tax professional
  • We will show you potential deductions to limit your tax liability for next year
  • Free year-round questions; we don’t send a bill every time you call
  • Our professionals will always return your calls and e-mails promptly
  • Our goal is for you to pay the least amount of tax legally possible because of our never-ending commitment to know the laws
  • Our goal is for you to never pay a penalty because of our strict adherence to deadlines
  • You will always know in advance what our fees will be, so there are no surprises

The information contained in this article is not intended to constitute legal, accounting, tax, investment, consulting or other professional advice or services. For specific information that applies to your circumstances you should consult a qualified tax advisor. In accordance with IRS Circular 230 Disclosure, and to ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this article was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing, or recommending to another party any tax-related matters addressed therein.