Unraveling tax information under normal circumstances is already difficult. Moreover, there are aspects of tax info that you probably rarely think about. Then the worst happens. One of your loved ones passed away. Now, you’re facing financial obligations in all directions – funeral arrangements, burial costs, and unpaid tax bills. Whether you’re the designated executor or you are helping someone else who is, here is some critical knowledge for resolving tax-related matters.
What Does the Term “Executor” Mean?
Before we continue, it might be helpful to explain what some of the jargon ahead means. The “decedent” is the term used to describe whoever the deceased was. Executors are charged with fulfilling the requests left behind in the will. They must also handle whatever financial obligations remain, which is why the phrase “personal representative” also exists. The IRS vastly prefers the second term. The executor is typically a close friend or family member, but not always. A probate court could choose them or be the widow, widower, or direct heir. It depends.
Which Tax Forms Should You File?
As the executor, you’ll need to complete one last Form 1040. This document is associated with income taxes. If it falls to you to sign the return, be sure to include Form 56. This piece of paperwork establishes your connection to the decedent. Form 1310 and Form 1041 are also in play, but they mainly only apply if you are not a widow or widower. Unappointed executors are also obligated to complete if you’re seeking a tax refund. On the other hand, Form 1041 has to do with the income the estate receives after its holder’s death and before the estate is considered closed. Despite what you may think, this process might take a while.
The Final Form 1040
Another unfortunate hurdle to overcome is the last Form 1040 you must file in their stead. It addresses all taxes from January 1 to their date of death. All forms and bills adhere to the normal deadlines (normally April 15, but as the pandemic has shown, that can be adjusted when necessary). Plus, you can also request an extension if needed. Deductions and credits are valid as long as you write or stamp “Deceased” at the top with the person’s name and death date to indicate the circumstances of the filing.
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