The Final Income Tax Return

As an executor, one of your most important responsibilities is ensuring the decedent's final tax return is properly filed. This task can feel overwhelming, but understanding the key requirements and deadlines will help you navigate the process successfully.

The decedent's final income tax return (Form 1040) is due by April 15th of the year following their death, just like any regular tax return. If the decedent died after October 1st, you have until the 15th day of the sixth month after death to file. Extensions are available if needed, giving you until October 15th.

The final return should include all income the decedent received from January 1st through their date of death. This includes wages and salary earned up to the date of death, interest and dividends received or accrued, Social Security benefits, retirement account distributions, and any other income sources. Income received by the estate after death is generally not included on the decedent's final return but may need to be reported on a separate estate tax return (Form 1041).

Gathering Documentation and Filing Requirements

You'll need to gather the decedent's tax records from previous years and collect all relevant tax documents for the final year, including W-2s and 1099s, bank and investment statements, records of deductible expenses, and documentation of estimated tax payments made during the year.

As executor, you'll sign the return on behalf of the decedent, writing "deceased" after their name along with the date of death. You'll also need to include a copy of your court-appointed letters testamentary or letters of administration as proof of your authority.

Handling Refunds and Outstanding Tax Debts

If the decedent is entitled to a tax refund, you can claim it on behalf of the estate by filing Form 1310 along with the return. The refund will be issued to the estate and becomes part of the assets you'll distribute to beneficiaries. However, if the decedent owed taxes, those debts must be paid from estate assets before any distributions to heirs.

Professional Help and State Requirements

Consider hiring a CPA if the decedent’s finances were particularly complex. An example of this might include small business ownership or significant investment income. The cost is typically deductible as an estate administration expense. Don't forget to check your state's specific requirements and deadlines, as they may differ from federal requirements.

Final Thought

Filing the decedent's final tax return is a crucial step in settling their affairs. Taking it step by step and seeking professional guidance when needed will help ensure you fulfill this responsibility correctly and on time.