In common estates, when to file the final income tax returns of a decedent can cause confusion. The executor or surviving spouse understand that filing final income tax returns is necessary. However, questions arise about the due date concerning the filing of the final returns. This is notably true when the decedent died before filing the prior year returns. Fortunately, the IRS and state taxing authorities establish guidelines that should clear up any confusion on the due date of the final income tax returns.

When to File the Final Income Tax Returns

In general, if the decedent earned enough income in the final year of life to require filing final income tax returns, the final returns for a calendar year taxpayer are due on April 15^th following the year of death. However, confusion sets in when the decedent died after the close of the tax year, but before the filing of the prior year income tax returns. To handle such a situation, the IRS provides the following guidance:

If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. The return for that year will be a regular return and the personal representative must file it.

Example. Samantha Smith died on March 21, 2015, before filing her 2014 tax return. Her personal representative must file her 2014 return by April 15, 2015. Her final tax return covering the period from January 1, 2015, to March 20, 2015, is due April 15, 2016.

So, if the decedent died before filing tax returns for the prior year, the executor must file the regular returns for the prior year. The next tax year, the executor must file the final returns.

Note: Not all states have an income tax and require a final income tax return. Refer to your state’s taxing authority to check for filing requirements on the final income tax return. In Massachusetts, estates require a state final income tax return. The requirements mirror the IRS requirements for the federal final income tax return.

Filing Requirements for the Final Income Tax Returns

Basically, the IRS establishes that the final income tax return of a decedent is prepared and filed in the same way as if the decedent was alive. Therefore, the same filing requirements that apply to individuals also apply to the decedent. Moreover, all credits and deductions to which the decedent qualifies may be claimed. So, the differences in requirements between a decedent and a living individual are the following:

• The executor reports only the income earned of the decedent up to the day of death in the final year of life.

• The final income tax returns need a bit more preparation by the executor as described in the article Preparing the Final Tax Returns for a Decedent.

• The living individual reports income earned for the entire year. Also, the living individual reports the full amount of income on the 1099’s.

Also, like individuals, an executor may not have to file a final income tax return. If the earned income is below the IRS income requirement, the executor may opt to not file a final return. However, if a refund is due or if the decedent paid estimated taxes, the executor should file a final income tax return to claim a refund.

Note: The IRS website provides tools for the following:

1. How Do I File a Deceased Person’s Tax Return? https://www.irs.gov/uac/how-do-i-file-a-deceased-persons-tax-return.
2. Do I Need to File a Tax Return? https://www.irs.gov/uac/do-i-need-to-file-a-tax-return.

Conclusion

For an executor, filing the final income tax returns for a decedent is not a difficult task. The requirements for filing the final returns and actually completing the final returns are concerns for the tax professional. Conversely, the only concern an executor has is to ensure the accurate and timely completion of the final income tax returns. 

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References

Publication 559 Survivors, Executors, and Administrators – This IRS publication will give details on when and how to complete the federal final income tax return.

Tax Returns and the Date of Death – The article will review the due dates for the federal final income tax return and the Massachusetts final income tax return.