Income Taxes After Death – Final Income Tax Return

· Why must an income tax return be filed after the death of an individual?
During the portion of a tax year that a decedent was alive, income was received under his or her own Social Security number. That income was reported to the state and federal governments along with appropriate tax withholdings. A final return must be filed with the federal, state, and local governments after the death of an individual in order to pay any remaining taxes or to claim refunds for this tax period.
In the case of a married individual, the final return may be part of a joint return with the surviving spouse.

· What items should be reported on a decedent’s final income tax return?
Any income actually received on a cash basis as well as any expenses that were actually paid should be reported on a decedent’s final 1040 return. The tax period between the beginning of a person’s taxable year (almost always January 1) and the date of his or her death is treated as the tax period for which Form 1040 and the state income tax return must be filed.

· Can a joint income tax return be filed in the year that a spouse dies?
Yes. A joint return may be filed with the decedent’s surviving spouse provided that spouse does not remarry before the close of the tax year. The return must include the surviving spouse’s income for the entire tax year. The decedent’s personal exemption can be used.
Authorization for the personal representative or trustee to file a joint return should be stated in the decedent’s will or trust document.
This option should always be explored because a joint return may well reduce total tax liability.

· My brother recently died, and I am the executor of his estate. He lived in a nursing home for years and has never filed an income tax return. What should I do?
You should promptly seek the advice of a tax preparer who can examine all the information that you can make available for the purpose of determining whether, in fact, your brother should have filed income tax returns. If your brother should have filed income tax returns, you should now consider filing returns for prior years and pay any necessary tax from estate assets or trust assets as the case may be.
As executor of your brother’s estate, your failure to file a return can make you individually liable for tax to the extent of the value of the estate assets or the trust assets under your control. You can find yourself in troubled waters if you ignore your duty to file income tax returns and pay taxes but, instead, distribute assets to your brother’s heirs.

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