Have you ever wondered what happens if a taxpayer becomes deceased during the calendar year? We know that both death and taxes are inevitable, but do taxes outlast the deceased? In most cases, the answer is yes. Tax filing obligations remain even if the taxpayer has passed part way through the tax year.
The final income tax return will include income up to the date of death and is required to be filed on paper. Deceased income tax returns cannot be electronically filed. Income or deductions that incur after the date of death need to be reported through the estate’s income tax return.
Certain types of income, such as interest, dividend, and capital gains can cause issues when determining the date they were acquired. The only income that should be reported on the final tax return was that earned prior to death.
Married taxpayers who file a joint return don’t experience much difference in their final return than previous years. You have to report the date of death of the individual taxpayer on the top of the form, but other than that, income and deductions are treated the same as they’ve been in years prior.
In most scenarios, the surviving spouse can become the representative for the deceased for the purposes of filing their tax return. The widowed spouse is still entitled to file a joint return during the year the spouse died, as long as they are not remarried at the end of the tax year. They can claim the personal exemption for their spouse and can opt to either itemize their deductions or take the standard deduction.
The decedent’s tax return must be signed by the executor or administrator on behalf of the taxpayer. In cases of joint returns, the surviving spouse’s signature is also required. If an executor or administrator isn’t named, the person filing the return acts as the personal representative for the taxpayer. If this is the surviving spouse, they need to sign the return and write “filing as surviving spouse” on the signature line for the deceased party.
The deceased and the surviving spouse are separately responsible for their tax liability or refund, unlike a traditional joint return which puts the responsibility on both equally.
Tax liability on a joint return where one party is deceased is based on the individual tax liability. If the parties are due a refund, you must complete and attach Form 1310, Statement of Person Claiming Refund Due to a Deceased Taxpayer.
Any income a person receives after death needs to be reported on a tax return for the estate. The estate will have its own identification number and require special forms for the taxes to be reported. A decedent’s tax return covers a small portion of time from the first day of the tax year up to the date of death.
A decedent’s tax return is required to be filed and all tax debts to be paid as if the taxpayer was alive through the end of the year. The tax year for the deceased ends on the date of death, but the final return is still due on April 15th of the following year, as with all returns.
In many cases, it’s recommended a professional tax advisor prepare the final return of a deceased taxpayer to ensure accuracy.