Preparing a person’s IRS final form 1040 is your last chance to be there for them. There are a few considerations, but the process can be as simple as any other tax form.
A Final Legacy
When filed properly, an IRS final form 1040 can lead to a return for their descendants instead of a bill. Filing these forms is an important skill for accountants because they have a final chance to make a difference for a grieving family. There are a few things to consider.
Stop Making Estimated Tax Payments
Once a person has died, they cannot earn income. Thus, you should immediately stop paying estimated taxes. Stop making estimated tax payments Once a taxpayer dies, he or she is no longer required to make estimated tax payments according to Reg. Sec. 1.6654-2(e)(7). The deceased person’s tax year ends on their date of death.
Who Signs the Return?
There are often many logistical questions when a person dies. Taxes are no exception. If there is a spouse or an obvious next of kin, they should sign the form. If not, an extension can be filed while courts decide who is the official executor of the estate. This person will also file the tax return and pay any tax liability. Spouses can even file jointly with a husband or wife who died in that tax year.
Accounting for Final Expenses
The final expenses of a deceased person can and should be written off in the IRS final form 1040. These include medical expenses, which are often sizeable at the end of life. Estates also will need an estate return, form 706, filed within a year of the death. If anything is owed for the final tax year, this can be deducted there as a debt. Refunds, on the other hand, are considered a taxable credit.
People who have had a loved one die are more in need of a CPA than ever due to the complexity of these laws. Filing the right forms will ensure that survivors get the maximum amount of income at a time of sadness and grief.
Gary Kaplan is a CPA with over 18 years of experience. Gary is available to assist taxpayers with a broad assortment of tax and accounting situations. Taxpayers in Florida, Maryland, New York, Washington, D.C., and Utah are encouraged to give Mr. Kaplan a call to discuss their unique tax situation.
