Key takeaways about filing your loved one’s taxes
Filing taxes for your loved one is very similar to filing your own taxes.
You need to be a legal financial representative to file taxes on behalf of your loved one.
Spouses who file jointly can do so for this final return as well. Special tax rates may apply to surviving spouses.
You may need to file either one or two years’ worth of tax returns, depending on whether your loved one had already paid taxes for the previous year.
The executor of the estate must pay off your loved one's tax debt before any assets can distributed to their new owners.
One of the tasks that must be taken care of after we lose a loved one is filing their final taxes. Taxes are a headache in the best of times, and they can be extra challenging when you are also dealing with grief. They are, however, an essential part of wrapping up your loved one’s financial affairs, and unfortunately putting them off too long can end up incurring penalties or fees, potentially adding further stress in such a difficult time.
As with many financial tasks, the job of filing taxes is the responsibility of the executor of your loved one’s estate. If there is no surviving spouse, and the court has not yet appointed an executor, whoever takes charge can sign the tax return as a “personal representative” utilizing IRS Form 56. The person filing can also apply for a tax filing extension to sort out all the necessary information and to take the process more slowly. (For more information on who is responsible for filing a loved one’s taxes, refer to IRS Publication 559, “Survivors, Executors, and Administrators.")
If you are unfamiliar with filing taxes, it may be helpful to seek professional guidance from a CPA or tax specialist to offer support and take on the burden of figuring out any complicated pieces of the person’s taxes so that you can concentrate on other aspects of saying goodbye to your loved one.
Gather the person’s tax forms as you would your own
To pay their final taxes, you will need to collect your loved one’s Forms W-2, 1099, or 1098. This information may be included in their personal records, or available from their most recent employer.
To know which forms you need, or to make sure none are missing, it is a good idea to refer to your loved one’s previous tax returns as a guide for which sources of income they likely had for the year in question. If you have not found these returns among their files, speak to their tax preparer if they had one, or you can obtain the information from the IRS using Form 4506 or Form 4506-T.
Whether you’re filing yourself or with the help of a professional, make sure to collect all information on their income, deductions, and tax credits, in the same way you would for your own taxes. Gathering these forms alone can be a challenge both physically and emotionally. Remember that it is OK to pause, take your time, and seek assistance from family and friends when you need a break.
Filing forms on their behalf
In order to file taxes on behalf of a loved one, along with the tax return you will need to provide either a letter from probate court appointing you as executor or, if no executor has yet been appointed, IRS Form 56. To find the best option for your particular situation, you can find more information on the IRS website. Depending on your loved one’s occupation, there may be several other forms that need to be filed.
If you are a surviving spouse, you may be able to simply do your taxes as married filing jointly and include all of your spouse's income from before they passed away.
No family member, except a surviving spouse, can be held responsible for paying your loved one's tax debt.
You should also consider your loved one’s effect on your own taxes. Surviving spouses receive a special tax rate, as do those claiming a someone who passed away as a dependent in the year that they died.
It is also important to note that if a portion of your loved one’s income is received by a beneficiary, that beneficiary may need to file the income on their own tax return, instead of that of your loved one. Again, seeking the guidance of a tax professional is encouraged.
Completing payments and distributing refunds
If your loved one endured a long-standing illness or was unable to pay taxes for any other reason, the estate may be liable for back taxes and penalties. You will want to make sure you are squaring away all tax payments as efficiently as possible.
If your loved one had not yet filed for the previous year when they passed away, you will be responsible for filing two years’ worth of tax returns. If they had paid their taxes for the previous year, you will only be responsible for any taxable income received in the year they passed.
The executor is responsible for utilizing the estate funds to pay any tax debt before any inheritance or bequests can be distributed to the rightful heirs. If the estate cannot cover the taxes and the person has a surviving spouse, they can be held responsible for any tax debt. No other family member will be liable for paying these taxes. The IRS offers payment plans to a surviving spouse who is unable to pay a tax debt on time.
The executor will receive any tax refunds due to the person who died, which then become funds of the estate, to be used to pay other debts or distributed to estate beneficiaries. If you are a surviving spouse and receive a refund check made out to both of your names, you must void the check and return it to the IRS with Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer, and a written request for a reissued check in your name alone.
Filing taxes while grieving
The task of handling such detailed and mundane tasks while experiencing grief and sorrow can be extremely difficult. Remember that it is OK to seek help, whether from friends and loved ones or tax professionals, to lessen the burden and help you focus on your own grieving process. Hiring a professional may not only ease your own burden, but it can also help you to avoid any mistakes, fees, or tax liabilities, and avoid any challenges in the future.
The work you are doing to close out your loved one’s financial responsibilities is an act of service and love. Take your time, and allow others to help you keep important deadlines and due dates in mind as you navigate your own well-being.
You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.
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