How to File Taxes for the Recently Deceased
Prepare in advance, look for hidden assets and consult with a tax preparer familiar with your family
After the loss of a loved one, the need to grapple with the intricacies of estate management and navigate the complexities of tax filing can be burdensome and emotionally draining chores.
Jasper Joyce, 48, from Phoenix, found herself thrust into the role of executor for her father Robert's estate following his death from colorectal cancer in October 2021.
Joyce and her older sister, Jaime, who lives in New York City, sold their father's business, which installs electronic audio amplification gear at concert venues, and other assets. Among these were several cars and their father's house in Mesa, Arizona, which fetched $290,000.
"Before he died, Dad said everything served its purpose, and don't feel badly about throwing anything away or selling it."
"Before he died, Dad said everything served its purpose, and don't feel badly about throwing anything away or selling it," says Joyce. "I'm a Realtor by profession; selling my dad's house was easier."
She had a pre-market offer for the fixer-upper in Mesa and closed the deal in just nine days. "After I sold (the house)," she says. "I felt the weight of it all; that he was gone and wouldn't visit the house again."
By the time she was ready to file tax returns on her father's behalf the following January, Joyce had already contacted his accountant. Despite a lack of outstanding debts, she underscores the importance of early preparation, emphasizing the need for beneficiary deeds to streamline the process.
A Good Accountant Is a Valuable Ally
"The accountant already had an inventory of his equipment before we sold the business, and they had a record of his investments, which I didn't even know about," Joyce says. Even though she had all the information she needed when she filed his taxes, "it can be a daunting task," she says, "so it's important to have a good accountant and to be aware of deadlines for filing tax returns."
Joyce is one of the millions of Americans who has filed taxes on behalf of a deceased parent, spouse or other relative. The Internal Revenue Service (IRS) anticipates the filing of over 128.7 million individual tax returns by this year's tax deadline of April 15, 2024. It is unclear how many will be filing on behalf of deceased loved ones.
Some will file taxes for the first time, typically accustomed to having their deceased spouse file on their behalf.
That's what happened with Sara Snow, 64, of Tulsa, Oklahoma, who found herself navigating a challenging and unexpected labyrinth after her husband Philip's sudden death from an aortic dissection on July 5, 2022.
A Quick Course in Tax Law
Despite the shock, Snow, a retired English teacher, took on the responsibility of closing out her spouse's estate and educating herself on financial matters. This included selling property in Green Mountain Falls, Colorado, for approximately $800,000 in 2023. This marked a significant step in managing her husband's passing.
Amid the complexities of her husband's will, Snow said she faced challenges deciphering tax laws and managing various realty properties and oil royalties. Snow said she wished there was a mentorship program for women dealing with both the emotional and practical aspects of grief.
"Either you fold or you fly, and I flew."
"I had to have a lot of faith in myself that I could do this," she says. "Either you fold or you fly, and I flew."
David Arntzen, a Certified Financial Planner in North Hollywood, California, shared insights into the challenges surviving spouses or children face when filing taxes for a dead relative. The IRS forms required to file returns depend on the deceased's financial activities, such as investments, rental properties or pensions.
Arntzen, who has 40 years of experience, stressed the importance of having a copy of the prior year's tax return as a template and, if required, seeking the assistance of a familiar tax preparer for continuity.
Regarding the documents required to file taxes for a deceased person, Arntzen outlined the standard documents such as W2s, 1099s, and relevant investment or retirement account statements.
Inventory Assets and Debts
He says certain states may have specific forms, and it may be necessary to check a box indicating the possession of a death certificate. Families could file an extension until October 15 for individuals who need more time.
Arntzen also discusses handling income earned by the deceased before death, explaining the process of opening an estate and filing a 1041 form for an estate or trust. He mentions transferring income-producing accounts to the estate and filing a separate tax return for this entity until the final distribution to beneficiaries.
"I had to have a lot of faith in myself that I could do this."
It's important to gather and inventory assets and debts, keeping track of mail for ongoing updates, and notifying institutions of an address change during the post-death administrative process, Arntzen says.
The intricacies of estate management and tax filing after the loss of a loved one demand resilience and adaptability. Beneath the statistics are real-life tales like those of Joyce and Snow — stories that remind us to pay close attention to the human side when dealing with financial responsibilities like filing taxes after a loved one dies.
