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Paying taxes or claiming tax refunds for deceased persons

A few weeks ago, we discussed the topic of the estate tax in New Jersey. While estate taxes are complex issues that don't always apply when someone passes away, income taxes -- also complex -- do usually apply. When a person passes away, if he or she received any income in the last year, then someone must file a tax return on the person's behalf.

Filing a federal income tax return for someone who has passed away is very similar to filing your own forms. If a person had income during his or her last year of life, all income up to the date of death must be accounted for on a form 1040, 1040-EZ or 1040-A filing form. The type of form used depends on the income level of the individual and whether credits or deductions will also be claimed.

Usually, the executor of the estate is tasked with ensuring income tax returns are filed. The executor must also either use assets from the estate to pay any taxes owed or receive the income tax return and distribute it appropriately under the estate documents.

It's possible a person could pass away with income tax matters from previous years still unresolved. The executor might note these matters during a review of the deceased person's correspondence. You can also request information from the Internal Revenue Service via the Request for Transcript of Tax Return, or Form 4506-T. The information provided under this request lets you know whether income tax returns were filed for previous years.

Ensuring that income tax matters are resolved prior to distributing assets of an estate helps protect the heirs. If matters aren't resolved, the IRS is likely to pursue collection activity. Working with a law professional who understands the various aspects of taxes in relation to an estate helps you ensure all tax matters are closed.

Source: IRS, "Deceased Persons – Filing the Final Return(s) of a Deceased Person," accessed Feb. 02, 2016

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