Filing taxes for deceased loved ones is one of the unexpected tasks that can go along with managing final affairs. Many people are uncertain about what goes into filing taxes for a deceased person because they aren’t sure where the responsibility falls. 

The first thing to know is that the IRS does not cancel tax debts upon death. The hard reality is that IRS penalties and interest can accrue if unfiled returns are allowed to linger without being addressed after a person had died. If you’re handling the estate of a loved one, it’s important to know how to file a tax return for a deceased person.

Yes, you do need to file taxes on behalf of a deceased person if you have been tasked with managing an estate, because tax obligations don’t evaporate when a person passes away. Both the IRS and state taxing agencies will hold the estate of the deceased liable for filing and paying taxes on time. If you are the representative of an estate, you must file taxes in the exact way that the deceased person would have. That means filing both state and federal taxes for the year of death. In most cases, the estate representative will need to file an IRS Form 1040. When filing taxes for a deceased person, you must report all income up to the date of death. Family members sometimes discover that a loved one has not been consistently filing and paying income taxes. If this is the case, you’ll need to go back to take care of all unfiled taxes before you can claim refunds or request relief for tax debt.

What Happens if a Deceased Person Owes Taxes?

If you discover that taxes are owed after filing a deceased tax return, it’s necessary to pay the outstanding balance. The consequences of not filing or paying state taxes and federal taxes do not go away just because someone is deceased. If taxes are not paid, the IRS and state taxing authorities may decide to pursue collection from the person’s estate. If unpaid taxes go back several years, the IRS may conduct an audit. In some cases, the IRS will actually attach an estate lien to a person’s property.

Do You Have To File Taxes for a Deceased Person?

Yes, you should file a tax return for a deceased person if they had any reportable income or assets in the year that they died. This includes both earned income and income from investments. While you may not be required to file a tax return for the deceased if the person made less than $12,400 (under 65) or $14,050 (over 65), it’s still a good idea to file because there are various credits and deductions that could actually provide the estate with a refund.

In some cases, the surviving spouse or representative of the estate will have to file a separate return from the deceased person’s personal return that represents the estate. This is determined by the size and nature of the estate. For instance, most estates that receive $600 in income annually will require you to file an IRS Form 1041. Additionally, there is the matter of estate tax for larger estates. If an estate is liable for the estate tax, the estate administrator must file IRS Form 706 within nine months of the estate owner’s death.

Who Should File Taxes for Someone Who Has Passed Away?

Typically, the default is for surviving spouses to take care of filing taxes for deceased spouses. If a joint tax return is filed, the responsibilities of tax preparation and payment of any owed taxes fall on the spouse. If a person is not married at the time of death, the executor or estate representative will be tasked with filing the deceased person’s federal and state income tax returns for the year. 

If a joint return is filed, the surviving spouse shares this responsibility. As far as who signs the tax return for a deceased person, the person who prepared the return should be the one to sign it. If a spouse is filing a joint return, they will sign the return as the surviving spouse. In all other cases, the executor or estate representative will sign the return.

How Long Should You Keep a Deceased Person’s Tax Records?

The minimum amount of time that you should keep a deceased person’s tax records is three years. Generally, returns are only subject to audits going back three years. 

However, there is the rare case where the IRS will go back as far as six years into past returns. For this reason, it’s recommended that you hold on to all tax records belonging to a deceased person for at least seven years. Keeping the tax records of a deceased person can be even more critical than holding on to your own tax returns, because trying to obtain records on behalf of someone else in the event that you need to supply evidence of tax records during an audit can be very difficult. You may not have access to stored documents or passwords that are needed to obtain copies of tax-related documents.

What Happens to a Tax Refund Check for a Deceased Person?

If you are claiming a tax refund on behalf of a deceased person, the IRS requires you to fill out Form 1310: Statement of Person Claiming Refund Due a Deceased Taxpayer. In most cases, you’ll save yourself a big headache if you request a refund in the form of a paper check. If direct deposit is set up using a bank account that is not in the name of the deceased taxpayer, there is a good chance that the bank will reject the transaction. The person claiming the refund must indicate that they intend to distribute the tax refund according to applicable state laws in the state where the deceased person resided. It may also be necessary to supply a court certificate documenting that you are the legally appointed representative of the deceased’s estate to prove that you are entitled to receive the deceased person’s tax refund under state law.

Get Help for Taxes After Death

Filing taxes for deceased family members can be a difficult and overwhelming task due to complicated, ever-changing tax laws. In addition to reporting income, a surviving spouse or estate manager must also figure out tax obligations for things like IRAs and retirement accounts. What’s more, many people are surprised to discover that they can inherit tax problems when they inherit estates. If you discover that an estate owes taxes, many of the same tax relief solutions that apply for all taxpayers can be used to pay down tax debt using an Installment Agreement (AI).If you’ve been left to handle a final tax return for a deceased person, Tax Group Center is here to help you get everything squared away. Our tax experts and CPAs are backed by 30 years of experience. If necessary, we can work with the IRS on your behalf to take care of any lingering tax debts or penalties that are tied to a deceased person’s estate. Contact us today if you have any questions about managing taxes after death.