Updated: 2020-09-14 by
There are three main federal tax returns that you'll need to consider filing in the year after someone has died, but it's unusual to file all three. In addition, you'll have to file an individual state income tax return for the decedent, and, in some states, a state estate or trust income tax return, or a state inheritance or estate tax return.
The person who files the return is called the Personal Representative. If there's a probate, that's the executor. If there's no official executor, the person who has taken responsibility for distributing the person's property will be in charge of paying the taxes. If there's a trust, and that's where the assets are, this is the Trustee. Basically, the IRS will deal with the person responsible for distributing the decedent's property, however that's going to happen.
Taxes are to be paid with the decedent's money. Heirs and beneficiaries are not responsible for paying the deceased person's taxes (except for the surviving spouse, who is responsible for those taxes). Taxes also get paid first from an estate or trust, so no one else is entitled to receive anything unless those taxes have been paid. The Personal Representative can be held personally liable for the tax bill, up to the amount that's been distributed to other creditors or beneficiaries! So, take your time and don't distribute anything until you're sure that there's enough left in the estate to cover the expected taxes due.
Final Individual Federal and State Income Tax Returns will be due by April 15th of the year following a person's death, provided the person earned at least the minimum amount of income set by federal and state law in that calendar year. If someone dies mid-year (as is almost always the case), an individual return will be due for the period from January 1 to the date of death. If a person was married at death, their spouse can still file a joint return for the year of death. You will use a form 1040 for this federal return, and Virginia's state income tax form for the Virginia income tax return.
For example, if Steven dies on May 13, his executor will need to file an individual return in the following year for the period January 1 - May 13. If Steven was married, his surviving spouse can file a joint return on April 15th of the year following Steven's death.
Federal Estate or Trust Income Tax Returns will also be due by April 15th of the year following a death (or 4 months after the 12 months following the date of death for an estate) if a trust or estate receives more than $600 in annual gross income. Examples of income that a trust or estate could receive are things like rents, royalties, and interest income from savings accounts or bonds. You will use a form 1041 for this return. Click here for an IRS summary of filing requirements.
The estate or trust is a separate tax payer from the decedent, and must receive it's own tax identification number before filing the return. Click here to learn how to get that tax identification number.
For example, if Steven's assets were held in a living trust, the Trustee of that trust would have received a tax identification number for the trust. The Trustee would then file a trust tax return for the period from May 13 to December 31 of the year after Steven died because the trust received more than $600 in gross income. If the trust did not distribute all of the assets by December 31 of that year, another trust income tax return would be due by April 15th of the following year (and every year until the trust's assets were completely distributed).
Alternatively, if Steven's estate were to be distributed by a Will, after Steven died on May 13, a probate would be opened, an executor appointed, and his estate would receive a tax identification number. Unlike individual returns, which are due by April 15th of the year following a person's death, and most trusts, which use the same calendar year accounting, an estate begins on the day a person dies, and continues for 12 months from that date--the returns are then due in the fourth month after the end of the estate's taxable year.
For the period from May 13 to April 30 of the following year, all of the estate's income was reported to this tax identification number. The estate then filed a 1041 estate tax return for that income the following August, because it totaled more than $600 in gross income.
State Income Tax returns for an individual are also due by April 15th. State income tax returns for estates and trusts are set by state law.
Federal Estate Tax Returns will be due nine months after a person's date of death, and there's an automatic six month extension available (but you have to request it by that nine month deadline). Very few estates need to file this return, currently the estates under $11,700,000 million (indexed every year for inflation) don't need to file a return, unless a surviving spouse wants to make use of their deceased spouse's unused exemption amount.
State estate and inheritance tax returns are due in some states. Click here to find out whether Virginia imposes a gift or estate tax.
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