Death and Taxes

After a person dies, their heirs are required to fulfill certain tax duties. This includes filing the deceased’s last tax return, managing their income, and paying any taxes due. The IRS usually approaches the children or family members of the deceased for resolution of any tax issues, including back taxes. It is important for the family/friends to resolve all the tax duties of the departed person as early as possible.

Filing the Deceased’s Final Tax Return

The tax return of the deceased is filed in the same way as when they were alive. You need to report their income and can claim eligible deductions and credits on their return. All income up to the date of their death must be included on the final return.

If the deceased had not filed all required tax returns from previous years, you will need to file these as well. You can use the IRS Form 4506-T, Request for Transcript of Tax Return to get tax information that you may need to file the return(s).

Paying Back Taxes

If the deceased owed unpaid taxes, you are required to pay the full amount owed. You may pay the amount electronically or with a credit or debit card. If you are unable to pay the full amount in a single payment, you may request an Installment Agreement. Under an Installment Agreement, you pay a fixed installment each month over several months to pay the full tax debt. If you have limited ability to pay, you may explore payment plans such as an Offer in Compromise and Partial Payment Installment Agreement.

Claiming a Refund

If the deceased is due a refund, you can claim his/her refund by filing Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer.

Estate Income Tax Return

When a person dies, his/her assets become the property of their estate. Any profits generated from their estate must be reported to the IRS. If the estate produces more than $600 of gross income annually, you need to file IRS Form 1040, U.S. Income Tax Return for Estates and Trusts. Usually, assets that generate income are stocks, savings accounts, mutual funds, rent from property, bonds, and CDs.

As the deceased and their estate are considered different entities for tax purposes, you will need to obtain an Employer Identification Number (EIN) for the estate. You can apply for an EIN online on the IRS website – IRS.gov – for free.