One of the many things an executor is responsible for is the preparation and filing of any and all taxes due upon the death of the decedent as well as for their estate. Filing taxes on behalf of an estate can be a difficult process, and knowing just how to handle each of the specific types of taxes is of paramount importance. Learning the specifics of each of three major types of taxes an executor is responsible for is the first step towards completing their duties in a timely and ethical matter.

Income Tax Return on Behalf of the Deceased:

The executor must file a tax return on behalf of the deceased for the final year of their life. This tax return is much like the tax return filed during life. It covers the same time period (January 1 – December 31). If the deceased was married, the executor will work with the remaining spouse to file the tax returns. For example, if the couple typically filed jointly, the executor and the remaining spouse will file together. If the deceased received a tax return, the money will become a part of the estate and will become a part of the tax return filed on behalf of the estate.

Income Tax Return on Behalf of the Estate Income:

In many cases, a deceased estate will generate some form of income. This could come from interest, stocks, bonds, a final paycheck or even a tax return filed on the behalf of the deceased after their death. All of this income must be properly reported by the estate. This involves filling a separate tax return. They laws governing this tax return can be complex and cumbersome and many executors choose to work directly with a tax preparer to ensure that they are properly filing the returns. It is important to remember that taxes on an estate are almost always higher than individual tax rates. There are several ways to handle an estate’s income and how it is taxed, including distributing the income to legal beneficiaries or heirs so that they pay the tax instead. A tax professional can assist with these determinations.

The Tax Return on Behalf of the Estate:

Not to be confused with the Estate Income Tax Return, the Estate Tax return deals specifically with taxes on the assets owned at the time of death. Some of these assets may be exempt, but those that are not are typically taxed at a very high rate. The executor must work closely with a tax professional to ensure that this return is prepared in full and includes an accurate and honest representation of the assets of the estate.

The rules governing tax returns for the deceased and their estates are complex and cumbersome. Working closely with a probate attorney and a qualified tax professional is the best way to ensure that the taxes that are paid on estate are indeed owed and that the entire estate is represented by the applicable returns.