You know what they say – You always have to pay the tax man. Even if you have passed on, taxes must be paid out of your estate one final time. If you have a will, you can assign an executor who will settle your final debts, but if you pass away without one, the probate court will assign an individual.
When it comes to estate taxes to be paid after an individual’s passing, there are only two major concerns – income tax and federal estate tax. In many cases, you do not need to worry about federal estate tax as it is only required for very large estate upwards of the $11 million range. If the estate does qualify for this, a Form 706 must be filed within 9 months of the passing, though extensions can be made in some cases.
As for income tax of the deceased, the filing deadline is the same as it is for living taxpayers. Furthermore, if they made less than $600 of income, you need not even worry about it. This can commonly be the case as the final filing starts at the beginning of the year and runs until death, so for January passings, this is usually the case. However, if the deceased was married and filed jointly, the final return can cover the income and deductions of the deceased until death and the surviving spouse’s yearly income and deductions.
However, it is best that you see a tax representative to do this final filing. It is crucial that it is done right as the executor may be held responsible for any fines or underpayment that happens. Often times the money for tax payment can be taken from the estate itself instead of the executor’s own pocket and reduced from the amount that needs to be split.
If you are working your way through tax or any other estate-related woes, contact us today.