If you have recently been appointed as the estate administrator for a deceased loved one, you may be required to file one or more tax returns in addition to managing the decedent’s assets, paying off debts and distributing any assets that remain to beneficiaries. This process can be complicated, but hiring an experienced tax attorney can keep it flowing smoothly, leaving you free to complete other tasks requested of you. Your lawyer will help you stay organized and make sure you file the proper paperwork every step of the way.
Determine the decedent’s assets, debts and beneficiaries
Once you receive the letters testamentary authorizing you to act on the decedent’s behalf, you can begin gathering the data needed to determine the value of assets and whether any debts are owed to creditors. All creditors will need to file a creditor claim to be recognized as having a legitimate request for a portion of the estate. If you have any reason to believe the decedent had incurred a debt to the IRS, you may need to specifically request that the IRS file a claim as well.
File the necessary tax returns
You may need to file one or more separate tax returns, depending upon the details of the situation:
- If the decedent had income during the year of his or her death greater than the minimum filing limit, you will need to complete a 1040.
- Any previous years during which the decedent earned income above the filing limit, but did not file taxes will require an additional 1040.
- Income tax returns must be filed on the estate itself if the assets generate more than $600 per year in dividends, rental income, interest, etc. If a functioning business will continue to operate as part of the estate, a new tax identification number (also known as an EIN or employer identification number) will be required; all new wages and income from the business will then be reported under the new EIN.
- With relatively large estates, an estate tax return must be filed on the transfer of any assets that remain after paying all of the decedent’s debts.
Working with a professional brings peace of mind
The details of estate administration can become daunting, but working with a professional tax attorney will bring you the peace of mind of knowing you are filing everything correctly and are being assisted by someone with years of experience.