Death & Taxes: Guide to Filing Taxes for a Deceased Taxpayer in the Year of Death
Losing a loved one is one of life’s most difficult moments. On top of the emotional challenges, there are practical matters that still need attention, including certain tax filings. In the year of a person’s passing, there is often at least one, and sometimes multiple, tax returns to prepare: a final individual return Form 1040 and, in some cases, a descendant’s estate income tax return Form 1041.
Both have unique rules and timelines, and taking care of them can help bring clarity and peace of mind for everyone involved. We’ll walk you through what to expect, who is responsible for filing, and how professional guidance can ease the process during a difficult time.
Key Takeaways:
- The year of death tax return may require both a final individual return Form 1040 and an estate tax return Form 1041 if the estate earns income over $600.
- Executor tax filing responsibilities fall to surviving spouses, personal representatives, or executors named in the will.
- Income before and after death taxes must be properly divided between the two returns.
- Estate tax returns may be required when assets exceed certain thresholds: Minnesota requires Form M706 when assets are over $3 million, while federal Form 706 may be required for larger estates. Each state has its own estate tax rules and thresholds.
- A CPA for estate and trust returns can help maximize deductions and minimize taxes. Schedule a call with Wood CPA today to discuss how we can help you during this challenging time.
Who’s Responsible for Filing
When someone passes away, the executor tax filing responsibilities usually fall to:
- A surviving spouse (often filing jointly for that year)
- An executor named in the will
- An administrator appointed by the court
- A personal representative
If you take on one of these roles, you’ll also need to notify the IRS of your authority by filing Form 56. This form lets the IRS know you are the authorized person to handle the decedent’s tax matters.
Tax deadlines don’t pause after a loss, which can feel overwhelming. That’s why it can be such a relief to have a CPA on your side to guide the process, keep things organized, and help ensure filings are done with care and accuracy. If you’re not sure where to begin, our tax planning and preparation services can help you take the first step.
The Final Individual Return (Form 1040)
The final individual return Form 1040 reports all income the person earned from January 1 through the date of death (IRS guidance here). This return can be filed using the same status they qualified for while living, often married filing jointly if there’s a surviving spouse, or single otherwise.
Key points to know:
- Write “Deceased” after the taxpayer’s name at the top of the return.
- If a refund is due and no spouse is filing jointly, you may need Form 1310 to claim it.
- Certain deductions and credits may still be taken, which could lower the final tax owed.
The year of death tax return is often the last opportunity to claim certain tax benefits for the decedent, and having a CPA review it can make sure nothing is overlooked.
Income Before vs. After Death
One of the more delicate parts of year-of-death tax filings is knowing which return should include which income:
- Income before death is reported on the final 1040.
- Income after death is reported on the estate/trust return (Form 1041).
For example, if a bank account earned $500 in interest in the year the person passed, and $200 of that interest was earned after the date of death, $300 would go on the 1040 and $200 on the 1041.
This division matters because the two returns are taxed differently. Having professional help ensures income is allocated correctly, avoiding confusion later.
The Estate or Trust Return (Form 1041)
If the estate or trust earns more than $600 in gross income after death, an estate tax return Form 1041 will likely be required.
A few things to know:
- You’ll need a separate Employer Identification Number (EIN) for the estate.
- The estate can take deductions for certain expenses such as legal fees, accounting costs, and administrative expenses.
- Beneficiaries will receive Schedule K-1 showing their share of the estate’s income, which they’ll report on their own returns.
Living Trusts and Tax Changes Upon Death
Many people establish living or revocable trusts during their lifetime for estate planning purposes. While the person is alive, income from the assets held in these trusts is reported on their personal Form 1040. However, when the person dies, the revocable trust becomes irrevocable and significant tax changes occur:
- The now-irrevocable trust must file its own tax return (Form 1040) and obtain a separate EIN
- Estate planning attorneys often handle establishing the EIN for both the estate and the irrevocable trust.
- The trust income is no longer reported on an individual’s personal return.
A CPA can guide you through what needs to be filed and help you understand how distributions will impact each beneficiary.
Estate Taxes (Form 706)
Most estate’s assets aren’t large enough to owe federal estate tax — the exemption in 2024 is $13.61 million, and Minnesota’s estate tax exemption kicks in at $3 million. But if the estate exceeds those limits, Form 706 will need to be filed.
Even if the estate is under the limit, there may be benefits to filing, such as preserving the portability of a spouse’s unused exemption for future use.
Income in Respect of a Decedent (IRD)
Some assets — like IRAs, certain unpaid wages, or accrued interest — aren’t reported on the final 1040 but are still taxable later. This is called Income in Respect of a Decedent (IRD), and it’s taxed to the person who receives it.
For example, if you inherit a traditional IRA, you’ll owe income tax when you take distributions. A CPA can help you develop a strategy for those withdrawals so you don’t pay more tax than necessary.
Practical Tips for Staying Organized
From my experience, here’s what helps make this process easier:
- Request several certified copies of the death certificate.
- Apply for an EIN for the estate or trust as soon as possible if your lawyer has not already.
- Keep account statements, legal documents, and receipts together in one secure place.
- Reach out for professional help early in the process so nothing important is missed.
Even in the middle of grief, having a trusted professional manage the details can take a huge weight off your shoulders.
Final Thoughts
The year of death can be emotionally exhausting, and filing taxes for a deceased person may feel like more than you can take on right now. Between the final 1040, a possible Form 1041, and even estate tax considerations, there’s a lot to sort through—but you don’t have to handle it alone.
Let Wood CPA Handle the Details So You Don’t Have To
At Wood CPA, we guide executors, surviving spouses, and personal representatives through every step of year-of-death tax filings. We handle the details with accuracy and compassion so you can focus on what matters most.If you’ve recently lost a loved one and need to file their final return or an estate/trust return, schedule a call with us today. We’ll help you navigate the process with clarity, care, and confidence.
