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This article was fact-checked by our editors and a member of the Credit Karma Tax® product specialist team, led by Senior Manager of Operations Christina Taylor. It has been updated for the 2020 tax year. Note: Credit Karma Tax® does not support Forms 1041 and 706.
When you lose a loved one, taxes might be the last thing on your mind. But the task of filing a deceased person’s final tax returns can fall on the shoulders of a family member or friend.
If you’re responsible for handling the final affairs of someone who has died, you may need to file multiple kinds of tax returns on behalf of that person. Let’s look at the tax returns that may need to be filed, situations that may require their filing and who is responsible for handling each.
- What tax returns might I need to file for someone who has died?
- Who is responsible for filing the returns of a deceased person?
- How do I file tax returns for a deceased person?
Multiple tax returns may be required when someone dies. Here are three of the federal tax returns that may be required.
Final Form 1040
First is the deceased person’s final Form 1040 — the federal income tax return that everyone uses and that’s typically due April 15 of every year. If your loved one earned income in the year they died, the IRS still wants its fair share. Depending on the person’s gross income, age and filing status, you may need to file a 1040 on their behalf.
Estate income tax return
When someone dies, their assets become the property of their estate. If the deceased person’s estate earned income after the date of their death — such as interest on a bank account or dividends from investments — you may need to file a second income tax return, Form 1041, for estates and trusts. Form 1041 is only required if the estate generates more than $600 in annual gross income.
Form 706 estate tax return
In addition to regular income tax, a second kind of tax can be levied against certain estates. Estate tax, also called the “death tax,” applies to estates worth $11.58 million or more.
If an estate is subject to estate tax, someone will need to file Form 706, a federal estate tax return, on behalf of the estate. Most estates are too small to be subject to the federal estate tax. If you’re in the position of handling tax affairs for someone who has died, it’s more likely you’ll only need to deal with Forms 1040 and 1041.Learn more about estate taxes
A common scenario
For the rest of this article, we’ll focus on Forms 1040 and 1041. Let’s look at an example of how final income taxes can work.
Jada passed away on July 31, 2020. Before her death, Jada earned wages of $65,000 from her job, $600 of interest income from a bank account, and $2,500 of dividend income on investments in a brokerage account. After her death, her estate received another $500 of interest income and $2,000 of dividend income. Her assets, which passed to her estate, were worth less than $500,000 total.
At the end of 2020, two tax returns would be required.
- A Form 1040 reporting the $65,000 Jada earned, $600 of interest income, and $2,500 of dividend income earned up until her date of death.
- A Form 1041 reporting the $500 of interest and $2,000 of dividends paid out after death.
Because Jada’s assets were well below the estate tax threshold, her estate wouldn’t be subject to the estate tax.
To be legally authorized to file returns on a deceased person’s behalf, you must be their personal representative — either the executor or administrator of the estate or anyone in charge of the individual’s property. In many cases, this person may be identified in the deceased person’s will as executor of the estate. If there isn’t a will or the executor named in the will can’t or won’t fulfill their duties, the court will appoint someone as administrator.
A surviving spouse can file a joint return with the deceased person if a personal representative hasn’t been appointed before the due date for filing the return the year of the deceased person’s death. But if the surviving spouse remarries before the end of the year in which the taxpayer died, then they can’t file jointly with the deceased spouse.
If you are the deceased person’s personal representative and make a mistake, either by not filing at all or filing the tax return incorrectly, the IRS may assess penalties, so you’ll want to take the responsibility seriously.
How can I avoid a penalty for underpaying federal income tax?
Generally, you can avoid an underpayment penalty by paying at least 90% of the total tax you owe for the current tax year or 100% of the tax shown on your last year’s return (whichever is less) by Tax Day.
Here’s an overview of what to consider when filing tax returns for someone who has died.
File the final Form 1040
The final Form 1040 covers the period from Jan. 1 of the year in which the person died through the date of their death. You must file and pay any tax due by the standard tax filing deadline (typically April 15) of the following year. If you need more time, you can request an extension of time to file the Form 1040.
The deceased person’s income will be taxed just as it would have been if they were still living. The same tax rates apply, and they can claim the same deductions and credits.
You’ll need to write the word “DECEASED,” plus the person’s name and date of death, across the top of the Form 1040 and complete it using the deceased’s personal information, including their Social Security number and address.
Since you’ll be signing the deceased’s final tax return on their behalf, you need to complete IRS Form 56 and attach it to the final Form 1040. And if you’ll be claiming a refund that would have been due to the deceased person, you’ll likely have to file Form 1310 unless you meet these requirements.
- You’re the deceased person’s spouse and filing a joint return or an amended joint return.
- You’ve been appointed by a court or are a certified personal representative filing an original return on behalf of the deceased. You’ll need to attach a copy of the court certificate confirming your appointment to the return.
File the estate’s income tax return
While the deceased person’s Social Security number is their taxpayer identification number for purposes of the income you’ll report on their 1040, you have to use a different identifier if an estate income tax return is required. That’s because tax law considers a person’s estate to be a separate entity from the deceased person for tax purposes. Once all the heirs and beneficiaries of the estate have received their final distribution of the estate’s assets, the estate ceases to exist and its tax obligations end.
The deceased person’s estate is taxed similarly to the way the person was taxed while they were living. Most deductions and tax credits allowed to individuals are also allowed to estates. But the estate is also allowed to claim a deduction for distributions to beneficiaries.
The estate’s first tax year begins when the decedent dies. You can choose to file a short-year return that ends on December 31 or the end of any other month that ends in an initial tax period of 12 months or less.
Form 1041 is due by the 15th day of the fourth month after the tax year-end if the personal representative chooses a fiscal year for the estate’s accounting period or by April 15 of the following year if they choose a calendar year accounting period.
Keep in mind you may also need to file a final state income tax return for the deceased, and a state income tax return for the estate. Check with the applicable taxing authority in the deceased’s state to find out which forms you may need to file and when the state returns are due.
If you need more information on filing taxes for a deceased person, check out IRS Publication 559, Survivors, Executors and Administrators. It includes instructions for completing both the final Form 1040 and Form 1041. The IRS also has a tool to help you determine who must file a deceased person’s final return and when it’s due.
It’s an emotional time when a friend or family member dies — and dealing with their tax liability can be challenging. But a methodical approach and guidance from the IRS may help you complete and file the necessary returns to fulfill any final tax obligations.
Relevant sources: IRS: Filing the Final Return(s) of a Deceased Person | IRS Instructions for Form 1041 and Schedules A, B, G, J and K-1 (2019) | IRS Nationwide Tax Forum (2010) Introduction to the Decedent’s Final Form 1040 | IRS: Filing the Estate Income Tax Return, Form 1041 | IRS: Estate Tax | IRS Publication 559, Survivors, Executors and Administrators (2019) | IRS Instructions for Form 56, Notice Concerning Fiduciary Relationship
Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She codeveloped an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s degree in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.