What Tax Returns Must The Executor File?
An overview of all the tax returns the executor might need to file on behalf of the deceased person or the estate.
Taxes are a big part of an executor’s responsibilities—and may seem like the most intimidating part. The good news is that you probably won’t be dealing with any complicated tax issues. Also keep in mind that you can hire experts to help you with tax questions and use estate funds to pay for their services.
Personal Income Tax (State and Federal)
Most executors must file final state and federal income tax returns for the calendar year in which the deceased person died. A tax return is required if the deceased person received at least a minimum amount of income (set by federal law each year) in the last year of life. You’ll use the familiar IRS Form 1040, and the return will be due by April 15 of the year following the death. For example, if the person died in November, you'll file a return for the year of death the following April 15. If the person died early in the year, before filing a return for the previous year, you may need to file returns for both the year of death and the prior year.
Estate Income Tax (State and Federal)
If the estate goes through probate and receives a certain amount of income while the probate court case is pending, you’ll also need to file income tax returns for the estate itself. State law may require you to notify the state taxing authority that you’ve begun a probate proceeding, so that the state is sure to get paid.
You can use a calendar year or a different fiscal year for the estate’s income taxes. For example, you might open a probate case in October and close it in August of the following year. To avoid filing two returns (one for each calendar year in which the estate was open and received income), you could use a fiscal year of October to October. Then just one return would be required, and it would be due four months after the end of the fiscal year.
Federal Estate Tax
Only if the deceased person left a very large amount of property—worth more than $5.45 million, for deaths in 2016—will you need to file a federal estate tax return. You’ll definitely need expert help in preparing the federal estate tax return, which is due nine months after the death.
State Estate Tax
You'll need to file a state estate tax return if a federal estate tax return is required OR if the state imposes its own estate tax. About half the states impose their own estate taxes. Rates are lower than the federal estate tax rates, but smaller estates are sometimes taxed. Again, it will be worth your while to get expert tax advice.
State Inheritance Tax
A few states impose inheritance taxes; the federal government does not. It’s not a tax on the entire estate. Instead, certain beneficiaries must pay tax based on the value of what they inherit.
Spouses (and registered domestic partners, in some states) and children generally pay low rates or are exempt from the tax, no matter how much they inherit. More distantly related family members or unrelated beneficiaries are subject to tax.
The executor is generally responsible for filing an inheritance tax return, and the executor may not be able to close the probate case without showing that all inheritance taxes have been paid. There is only one return per deceased person, even if there are multiple inheritors who owe tax. If there’s no personal representative for the estate, it is the legal responsibility of the beneficiaries to file the return and pay the inheritance tax.
Trust Income Tax
If you’re the trustee of a trust as well as an executor, you may need to file state and federal income tax returns for the trust as well. A return will be required if the trust receives at least a minimum amount of income (set by federal and state law). If you’re handling a simple living trust and can wrap it up quickly after the death, you probably won’t need to file income tax returns for the trust.
Getting Tax Forms
You can get quick access to tax forms for all states and the federal government at the website of the Federation of Tax Administrators. IRS forms are available at the IRS website or by calling 800-TAX-FORM (800-829-3676).