Author Topic: Preparing Taxes for deceased person  (Read 3349 times)

vespito

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Preparing Taxes for deceased person
« on: February 04, 2014, 09:48:57 AM »
Hi all,
My mother in law's aunt passed away last year.  MIL is executor of estate and had/has power of attorney for all accounts.  However, she would like me to file the taxes.  I visited the IRS site but have a few questions. 

I have no idea if she will owe taxes or get a refund - the paperwork is being mailed to me.  MIL's aunt was extremely well organized, so I'm not too worried about that.

Thanks for any assistance!

1) Do I need to file separate returns for the individual and the estate?
2) Do I really just write deceased on the top of the return (what about e-file)?  Since this is my first go at this and the results affect someone other than me, I feel I should use tax preparation software (Turbo tax or tax act) for guidance.  I'll also look at all the forms and read instructions (don't even know what forms yet)
3) Anyone who has done this - anything I should know in advance?  anything you wish you knew?  Other than income statements, DIV forms, etc - any other paperwork I need?
4) I'm still navigating the IRS site but haven't found a whole lot
5) State taxes are for CA
« Last Edit: February 04, 2014, 09:52:22 AM by vespito »

tat96

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Re: Preparing Taxes for deceased person
« Reply #1 on: February 04, 2014, 10:28:01 AM »
Sorry for your loss and being stuck with this unenviable task.  I would be cautious using the IRS website if you are not familiar with tax terminology as it can be quite confusing.  From what I remember from my college tax classes filing for a deceased individual is not that much different from a regular return unless they have an estate worth millions.   

Here is a link to a tax expert explaining the process of filing taxes for a deceased individual. 

http://taxes.about.com/od/taxglossary/qt/Death.htm 

I would not solely rely on one website though.  Check several websites and make sure that they all have the same information and it is current.  Estate tax amounts and filing limits change all the time.  Do not hesitate to call the IRS if you need to.  You may be on hold for a while but they should be able to answer your questions as to which forms to file given your situation.  If you go this route there is a chance that they will only be able to give you general information as you are not the executor and do not have a POA.  Hence, you will only be able to ask about the process and not your MIL's aunt's specific tax liabilities/obligations/potential refund etc. 

Hope this helps!



Numbers Man

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Re: Preparing Taxes for deceased person
« Reply #2 on: February 04, 2014, 10:32:19 AM »
I would have the attorney that handled the estate do all the necessary tax returns.

Frankies Girl

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Re: Preparing Taxes for deceased person
« Reply #3 on: February 04, 2014, 10:54:26 AM »
I would have the attorney that handled the estate do all the necessary tax returns.

^this

My father passed away in 2012, but his estate was open into 2013. If there is any inheritance/estate property that needs to be resolved, the attorney that was on record for the estate handled the filing of both individual and estate. Helped that he was also a tax lawyer and acted as an accountant for my dad.

Same thing when my grandmother passed away; my mother was the executrix, and the lawyer handled all tax filing.

If the estate matters concern a significant amount of property or money or heirs, there is no way I'd have handled it myself. If you get all the papers and feel like tackling it, I'd still make sure to call the IRS any time there was the least little question and CYA!


So sorry for your family's loss!

vespito

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Re: Preparing Taxes for deceased person
« Reply #4 on: February 04, 2014, 11:30:29 AM »
Thanks everyone.  Estate won't be millions (or close to that), but should be enough to cover an attorney.  I'll see what paperwork I get in the mail, review it, and probably suggest an attorney handle it.

KeithTax

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Re: Preparing Taxes for deceased person
« Reply #5 on: February 04, 2014, 11:33:01 AM »
Vespito,

Here are the answers to your questions:

1.) A decedent return is required for your mother-in-law's aunt. The attorney can file the estate return if it is needed. The decedent should be filed by a regular tax preparer to save on cost. Also, attorneys are great at legal, but not so often on taxes.

2.) You can file most decdent returns electronically. Due to the complexity I recommend a tax pro. This is one area where if you ask the question you shouldn't go it alone.

3.) I've prepared several hundred of these types of returns. All the information from the begining of the year to the date of death go on the return. Listing all the details here would not fit in a forum post.

4.) The IRS site doesn't have much because the tax rules are buried in each section of the tax code. You have to research each area of income and deduction to find the appropriate way to handle the item.

5.) You need to take the same approach for state.

Most decedent returns are fairly simple: interest, dividends, mutual fund capital gains distribution, IRA and annuity distributions. I'm not sure how good the online tax software works on decedent returns.

Hope this helps.

vespito

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Re: Preparing Taxes for deceased person
« Reply #6 on: February 04, 2014, 01:25:19 PM »
KeithTax - Thank you so much. Extremely helpful - I appreciate the response.