No one likes doing taxes, but the task is even more daunting when filing a return for someone who has died. If you are preparing a 1040 federal income tax form for a spouse or parent, you are grieving while also gathering tax records. If you are the executor for an estate, you may not know the history of the decedent’s tax situation nor have the access you need to important documents. To help alleviate the hassles, we talked to experts about how a decedent’s tax return might be different from the usual 1040 form, as well as the pitfalls to avoid as you prepare to file.
1. Know marital filing status
A surviving spouse will file a joint return for the year of death and write in the signature area: “Filing as surviving spouse.” The spouse also can file jointly for the next two tax years if he or she has dependents and has not remarried. This special provision for qualified widows and widowers allows the surviving spouse to benefit from the advantages of a joint return, such as the higher standard deduction.
2. Get authorization to file
If there is not a surviving spouse, someone needs to be chosen to file the tax return. Options include the estate’s executor if there was a will, the estate administrator if there’s not a will, or anyone responsible for managing the decedent’s property.
“Typically, we see it as the surviving spouse or child, a trustee, a business partner in real estate, et cetera,” says Stephen A. Bonfa, a Brooklyn, New York, tax attorney. Personal representatives notify the IRS of their right to file the tax return by including Form 56 with the 1040, Bonfa adds.
To prepare the return — or provide necessary information to an accountant — you will need to access financial records. Most financial institutions will want a copy of the certified death certificate before releasing information.
3. Find last year’s return
This is your starting point. "That becomes your checklist of the documents that you'll be expecting for the current year,” says Sheila Brandenberg, a CPA with clients in New York and New Jersey. If it’s a paper return, you need to find it. Returns filed electronically can be tricky if you don’t know the password to sign in to the software used or perhaps can’t even turn on the decedent’s computer where files are kept. An important step in estate planning is to give passwords to a trusted person or instructions about how to access that information after your death.
If you can’t find last year’s return, you can submit Form 4506-T to the IRS to request a transcript of the previous tax return, notes Simone Alting, associate partner, U.S. Tax and Advisory Services, at the KNAV firm in Atlanta. The transcript summarizes what was on the return, including filing status, taxable income, tax payments and more. The IRS also can provide source documents such as a W-2 or a 1099-INT from a bank or a 1099-R for a pension distribution from a union — all the documents sent to the IRS on your behalf — which can help you know what documents to gather now. “You would basically be playing detective and going back and trying to recreate this information for that person,” Brandenberg says.
4. Update the address on the return
If you’re not a surviving spouse or didn’t live with the decedent, make sure you update the tax return to list your address as an “in care of” address. That way, any correspondence with the IRS will come directly to you. “Most tax programs have that line ‘in care of,’ ” Brandenberg says.