Filing personal income tax returns is enough to keep most people occupied. Whether you are a procrastinator or the opposite, you probably have to set aside a few hours (at least) each spring to satisfy your obligations with the IRS.
Special circumstances, such as a death in your immediate family, may require you to file more than one tax return in a single year. If you are the executor or personal representative of a loved one’s estate and that loved one passed away in 2022, you will likely need to file an income tax return for that estate before April 18, 2023.
Many people forget to file an estate income tax return, which is understandable–a lot of loose ends need to be tied up after someone passes away. The IRS, however, may not be as understanding.
Does Every Estate Need an Income Tax Return?
A federal income tax return should be filed for an estate if assets included in the estate produced income of at least $600 in a calendar year OR the decedent earned that much in a calendar year prior to their death. The same goes for trustees overseeing assets that produced at least $600 in income and guardians of elders or incapacitated adults who made at least $600.
What Do You Need in Order to File an Estate Tax Return?
Generally, anyone filing an income tax return on behalf of someone else needs to complete Form 56, the Notice Concerning Fiduciary Relationship. Besides that, the two most common tax forms a decedent needs filed on their behalf are Form 1040 and Form 1041. Form 1040 deals with income the decedent made in the last calendar year of their death, while Form 1041 covers income produced by assets now belonging to the decedent’s estate (after the decedent passes away).
A tiny percentage of estates are also subject to the federal estate tax. The exemption amount for those who died in 2022 is $12.06 million, and it will jump to $12.92 million in 2023. Oklahoma does not have an estate tax, and spouses may combine forces to double their exemption amounts. If, however, your loved one’s estate is valued over the exemption amount, you will need to file Form 706 with the IRS.
Don’t Wait to File Your Taxes!
If you must file an income tax return on behalf of a trust or estate, we strongly recommend getting this out of the way as soon as you can. In the aftermath of a loved one’s death, this task can easily slip your mind. The pertinent forms usually become available sometime in January. It’s especially important to begin these tax returns earlier rather than later if you end up needing the help of an accountant, attorney, or other professional.
Pence Law Firm provides strategic, personable representation to Oklahomans mired in probate or estate matters. We aim to provide practical solutions to families so they can fulfill their legal obligations as efficiently as possible. Our team would be honored to speak to you about your legal needs; contact us here to set up your consultation.