Ten Tax Tips for a Deceased Taxpayer’s Final Form 1040

Losing a loved one is difficult. When preparing and filing a deceased taxpayer’s final Form 1040 (U.S. Individual Income Tax Return), it is important to consider more than just who can sign the tax return on behalf of the deceased taxpayer.

So, here are ten tax tips for the preparation and filing of a deceased taxpayer’s final Form 1040:

Joint Income Tax Return– A joint income tax return may be filed by the surviving spouse with the deceased taxpayer for the year of death. The surviving spouse may sign the income tax return, as well as the Executor or Administrator of the deceased taxpayer’s Estate;
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;
Estimated Income Tax Payments– Quarterly estimated income tax payments are not required to be made after the deceased taxpayer’s death. The decedent’s tax year ends on the date of death and only income earned from January 1^st until the date of death is reportable on the final 1040. However, if the decedent filed jointly, the surviving spouse may need to make estimated income tax payments for his/her individual income tax liability;
Savings Bond Interest– Upon liquidation of the savings bonds, the accrued savings bond interest is taxable to the Estate of the deceased taxpayer 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 post date of death would be reported by the Estate or beneficiary. This post mortem tax planning strategy may save income tax if the deceased taxpayer’s income tax rate is lower than the income tax rate of the Estate or beneficiary;
Pre-Death and Post-Death Allocation of Income– Only the income earned prior to the deceased taxpayer’s death is reportable on the final 1040. The income earned after the deceased taxpayer’s death is reportable on the Estate’s Fiduciary Income Tax Return or the beneficiary’s Individual Income Tax Return;
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 the financial institutions for the proper reporting of post death income;
Medical Expense Deduction– Medical expenses paid in the year of the taxpayer’s death may be deducted regardless of whether they were paid prior to death or after death;
Funeral Expenses– Funeral expenses may not be deducted on the final 1040;
Capital Losses– Do not forget about the deceased taxpayer’s capital losses. The deceased taxpayer’s remaining capital loss carryover must be used on the final 1040 because it does not pass to the surviving spouse, the Estate, or beneficiary; and
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 15^thof the year after death. Consider applying for an automatic six month extension in order to have additional time for income tax planning. However, make sure that the deceased taxpayer paid his/her 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 an integral part of the post mortem tax planning process and may result in income tax savings. Russo Law Group, P.C., can help a deceased taxpayer’s surviving spouse, Executor or Administrator implement post mortem tax planning. In addition to preparing and filing a deceased taxpayer’s final 1040, Russo Law Group, P.C., can consult with your accountant/tax preparer.

We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you after the loss of a loved one.

Marie Elena R. Puma, Esq.