What is a decedent’s final income tax return?

What happens if a taxpayer passes away part way through the calendar year?

We have all heard the saying, “the only thing certain is death and taxes.” I thought I would take this time to discuss both of those.

Specifically, what happens if a taxpayer passes away part way through the calendar year.

In fact, the income tax filing obligation as well as tax liability are such that they often outlast the taxpayer and the tax man ultimately has the final word.

A decedent’s final income tax return includes income and deductions through the date of death. This return cannot be electronically filed and must be paper filed. Any income or deductions beyond the date of date would be reported on the estate income tax return if necessary.

The date of the earnings can be especially problematic for income such as interest, dividend, and capital gains. Only that portion of income that was earned prior to the date of death should be reported on the decedent’s final return.

If a taxpayer is married and filing a joint return, the final return is really not very different than any other annual filing other than reporting the date of death of the particular taxpayer on the top of the return. All income, deductions and such would be treated similarly to previous years.

Generally, the surviving spouse can act as the personal representative for the decedent for tax filing purposes. Generally, the widow or widower may file a joint return in the year of death unless they have remarried prior to the end of the year. The surviving taxpayer can claim both personal exemptions and either the full standard deduction or itemized deductions.

If an executor or administrator is involved, this individual must sign the return on behalf of the decedent. The spouse must also sign in the case of a joint return.

When there is no executor or administrator, the responsible party filing return can sign the return as a personal representative. If a joint return is filed by the surviving spouse alone, that individual should sing the return and write “filing as surviving spouse” in the space provided for deceased signature.

A decedent and his or her surviving spouse have a separate interest in any tax liability or refund, rather than a joint interest.

The tax liability on a joint return is allocated to a decedent based on their relative separate tax liability. If a refund is due there is one more form that must be completed. The person preparing the decedent’s final return must also complete and attach a copy of IRS form 1310, Statement of Person Claiming Refund Due to a Deceased Taxpayer.

Income received after death should be reported on an estate income tax return.

An estate is a unique taxing entity with its own identification number and special forms designed for estate tax reporting. The return of a decedent covers the short period beginning with the first day of the final tax year and ending at the date of death.

However, the filing of the return and payment of taxes may be made as though the decedent had lived to the tax year. A decedent’s tax year ends on the date of death, but the actual due date of the final return is April 15 of the year following the decedent’s death.

It is advisable to hire a professional to prepare the decedent’s final return.

It is hard enough preparing your own taxes, and many people do. However, it is entirely different to prepare a loved one’s final return when the paper trail may be difficult to follow or nonexistent.

In addition, if you make a mistake such as not filing at all to filing without the proper documents the personal representative who is trying to help out can be held personally liable.

Paul Pahoresky is a partner in the accounting firm of JLP CPAs. He can be reached at 440-970-1040 extension 14 or at paul@jlpcpas.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics.

A decedent’s final income tax return includes income and deductions through the date of death. This return cannot be electronically filed and must be paper filed.