Decedent’s Tax Returns
The personal representative is responsible for the following returns when required.
Form 1040, Final return for year of death (gross income of a decedent from January 1 until the date of death is reported on the decedent’s final income tax return).
-Form 1041, Income tax returns for the probate estate (required if income greater than $600 is received after death by the decedent’s estate).
-Form 706, Estate tax return (required if decedent’s estate exceeds the estate tax exclusion ($5,250,000 in 2013) or if portability election is made.
-Form 709, Gift tax for year of death (required if the decedent gave more than the annual exclusion ($14,000 for 2013) to any one person in the year of death or failed to file any prior year gift tax returns).
-Returns not filed by decedent for prior years—Form 1040, Form 1040X, Form 709.
-State income tax and estate tax returns. Some states do not have an estate tax, but several states have annual estate tax exclusions that are significantly less than the federal exclusion.
A personal representative may be personally liable for unpaid tax if he or she distributed assets, the estate is insolvent as a result, and the personal representative had notice of the tax claim.
Application for Employer Identification Number (EIN)
An executor should obtain an EIN for the probate estate as soon as possible. The identification number must be included on estate returns, statements, and other documents. The executor can obtain an EIN immediately by phone at 800-829-4933 or at www.irs.gov by searching “EIN online.”
Note: The processing time for an EIN application by mail is four weeks.
Notice of Fiduciary Relationship
The personal representative must notify the IRS of the fiduciary relationship. Form 56 can be used for this purpose. File separate forms for the decedent and estate. Form 56 can also be used to notify the IRS of a change in fiduciary or termination of fiduciary relationship.
Form 4810 can be filed to shorten the statute of limitations for tax returns from three years to 18 months. File Form 4810 separately after the returns are filed. Prompt assessment can be requested for Forms 1041 and Form 1040, including returns filed by the decedent. Prompt assessment cannot be requested for federal estate tax.
Discharge From Personal Liability
Personal representatives can request discharge from personal liability for estate, gift, and income tax after returns are filed. The personal representative is discharged from personal liability nine months after receipt of the request by the IRS, unless notified of unpaid tax.
All personal representatives must include in their gross income any fees paid to them from an estate. Generally, a taxpayer is not in the trade or business of being an executor and will report these fees on Form 1040, line 21.
Income in the Year of Death
Report income actually or constructively received by the decedent before death on the final Form 1040. Report income received after death on the return of the recipient.