Benjamin Franklin said that “nothing can be said to be certain, except death and taxes.” This adage holds especially true after the passing of a loved one, as the government still expects forms to be filled out and taxes to be collected during the decedent’s estate administration. Dealing with the grieving process while resolving estate matters can be hard on anyone. To help, here is a summary of some of the important tax forms that an estate executor or administrator should be aware of.
What it is: The final income tax return of the decedent.
Deadline: Filed April 15 after the year the decedent passed away.
Where to get it: Form 1040 | IRS
Extension options: October 15 if filing 6 month extension using Form 4868.
Key points: If the spouse is filing for the decedent, he/she can file a joint return and sign as the surviving spouse. In doing so, the decedent estate and surviving spouse may be jointly liable for the full amount of income taxes due, so it’s important that the surviving spouse is aware of any outstanding tax issues of the decedent.
What it is: Form 1041 is the income tax return of a decedent’s estate after they have passed away. It’s similar to a 1040, and is filed for the period between the decedent’s death and when the estate closes.
Deadline: 4 months, 15 days after close of the estate or trust tax year. Most of the time this is April 15, as the estate tax year is normally calculated from the month when the deceased passed away to the end of that calendar year. For example, if an individual passed away July 1, the calendar year would end December 31 and the executor would need to file April 15 the following year.
When filing, an executor has an option to choose a fiscal year instead of calendar year. The fiscal year election will calculate the year twelve months from the month preceding the date of death.
Where to get it: Form 1041 | IRS
Extension: 5.5 month extension using Form 7004. For estates using calendar year periods, the deadline would be September 30.
Key points: Form 1041 should be filed for estates that have income producing assets over $600, or has a beneficiary who is a non-resident alien. An estate or trust will need an EIN (employer identification number); this is a 9 digit number assigned to an entity in order to pay taxes. EIN’s may be obtained by applying online.
The advantage of selecting the fiscal year option is it can help defer taxes on the estates’ income and allow beneficiaries to plan for that income in their personal returns. However, the disadvantage of this option is that a fiduciary will not be able to rely on income reporting using IRS 1099 forms since those forms are generated using calendar year calculations.
What it is: Form 56 authorizes you to act as a fiduciary on behalf of the decedent or the decedent’s estate.
Deadline: Should be filed with the decedent’s final 1040 and/or initial Form 1041.
Where to get it: Form 56 | IRS
Key points: If you are acting as executor of an individual’s filing or as the executor of the estate, you will need to fill a Form 56 for each. Form 56 should be filed with each return.
What it is: Estate tax return used for estates that are greater than the estate tax exemption.
Deadline: 9 months from the decedent’s date of death.
Where to get it: Form 706 | IRS
Extension: 6 month extension if filing Form 4768.
Key Points: The estate tax exemption is currently $11.7 million in 2021 and $12.06 million in 2022. For estates greater than these amounts, Form 706 is used to calculate any estate taxes or generation-skipping transfer taxes owed. For estates smaller than the threshold, the estate tax return must also be filed if the estate wants to use the portability election. The portability election allows the transfer of the decedent spouse’s unused estate tax exclusion to the surviving spouse.
What it is: Form to notify the IRS of a change in the decedent’s home mailing address.
Deadline: None, use of the form is voluntary.
Where to get it: Form 8822 | IRS
Key Points: An executor should file Form 8822 to change the last known address with the IRS in order to receive tax information of the decedent.
What it is: Provides the executor permission to request information from the IRS on behalf of the decedent.
Deadline: None, but is auto-revoked after seven years by the IRS.
Where to get it: Form 8821 | IRS
Key Points: Should be used by the executor to receive confidential tax information of the decedent. This is useful when attempting to gather prior tax transcripts, W-2s, 1099’s, etc.
What it is: Income tax form for Californians.
Deadline: Filed April 15 after the year the decedent passed away.
Where to get it: Form 540 | FTB CA
Extension: Automatic extension to October 15. Unlike Federal taxes, there is no requirement to file an extension request. However the 540 must be filed by the extended deadline (Oct 15) for the extension to apply.
Key Points: This tax return is used for the tax year when the decedent passed away, from January 1 to the death of death.
Having clarity into which forms to file and when can alleviate some of the added stress following the passing of a loved one. Bookmark this blog to reference the specific forms and deadline dates or speak with a financial advisor who specializes in estate planning. Working with a financial advisor well versed on the unique aspects of trusts and estates can help ensure you are prepared come time to file these forms for your decedent’s estate.
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