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** This article has been revised from its original version which was published on June 18, 2018.
Losing a loved one is difficult. When preparing and filing a deceased taxpayer’s final Form 1040 (U.S. Individual Income Tax Return), it’s important to consider more than just who signs the return.
Our New York estate planning and tax planning lawyers offer ten tax tips for the preparation and filing of a deceased taxpayer’s final Form 1040:
1. Joint Income Tax Return
The surviving spouse may file a joint income tax return for the deceased taxpayer in the year of death. They may sign the income tax return, as well as the executor or administrator of the deceased taxpayer’s estate.
2. Income Tax Refund
A Form 1310 (Statement of Person Claiming Refund Due a Deceased Taxpayer) is required when the income tax return is not a joint return filed with the surviving spouse, or if no executor or administrator has been appointed.
3. Estimated Income Tax Payments
Quarterly estimated income tax payments aren’t required after the deceased taxpayer’s death. The decedent’s tax year ends on the date of death, and only income earned from January 1st until their death is reported on the final 1040. However, if the decedent filed jointly, the surviving spouse may need to make estimated income tax payments for their individual income tax liability.
4. Savings Bond Interest
After liquidating savings bonds, the accrued interest is taxable to the deceased taxpayer’s estate or to the beneficiary. However, an election may be made to report the accrued savings bond interest through the date of death on the deceased taxpayer’s final 1040. Any savings bond interest accrued after death would be reported by the estate or beneficiary. Our post-mortem tax planning lawyers use this strategy to save income tax if the deceased taxpayer’s income tax rate is lower than the rate of the estate or beneficiary.
5. Pre-Death and Post-Death Allocation of Income
Only income earned before the deceased taxpayer’s death is reported on the final 1040. The income earned after the deceased taxpayer’s death is reported on the Estate’s Fiduciary Income Tax Return or the beneficiary’s Individual Income Tax Return.
6. Federal Tax Identification Number for the Deceased Taxpayer’s Estate
Upon the appointment of an executor or administrator of the deceased taxpayer’s estate, a Federal Tax Identification Number must be obtained and provided to financial institutions to report post-death income properly.
7. Medical Expense Deduction
Medical expenses paid in the year of the taxpayer’s death may be deducted regardless of whether they were paid before or after death.
8. Funeral Expenses
Funeral expenses may not be deducted from the final 1040.
9. Capital Losses
Don’t forget about the deceased taxpayer’s capital losses. The remaining losses carry over on the final 1040 because they don’t pass to the surviving spouse, estate, or beneficiary.
10. Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (Form 4868)
The deceased taxpayer’s final 1040 is due April 15th of the year after death. Consider applying for an automatic six-month extension for additional time for income tax planning. However, make sure that the deceased taxpayer paid their estimated income taxes prior to death, and if not, make an estimated income tax payment with the extension application.
A deceased taxpayer’s final 1040 is integral to post-mortem tax planning and may result in income tax savings. Our trust and estate tax planning lawyers can help a surviving spouse, executor, or administrator prepare and file a deceased taxpayer’s final 1040. Our tax planning lawyers can also consult with your accountant or tax preparer.
When starting your New York estate planning, it’s important to consult with and retain experienced trust and estate lawyers. The knowledgeable and compassionate team at Russo Law Group, P.C., provides professional services and advice regarding long-term care expenses, asset transfers, gifting, penalty periods, pooled trusts, and more. Take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. provides peace of mind. Please contact our law firm to speak with one of our experienced elder law and estate planning attorneys today at 1 (800) 680-1717.