As previously discussed, as Personal Representative you are responsible for filing the decedent’s final tax returns and, if necessary, back tax returns. Those returns are filed under the decedent’s Social Security Number.
Generally, if the Estate generates more than $600.00 in annual gross income, the Personal Representative will be required to file a tax return. Estates (and Trusts) file IRS Form 1041 (this is in contrast to individuals who generally file IRS Form 1040).
When someone dies, their assets become property of their Estate. Any income the assets generate become part of the Estate and may require you to file an Estate income tax return. Some examples of income producing assets are CDs, bonds, mutual funds, rental property, savings accounts, stocks, or other income or dividend producing financial assets. Beneficiaries of the Estate will receive a Form K-1. Form K-1 flows each beneficiary’s portion of income, gains and losses to the beneficiary themselves. Each beneficiary will report these amounts on their personal tax returns.
Form 1041 is complex. It is advisable that the Personal Representative seek the assistance of a qualified tax preparer or CPA to prepare the tax filings for the Estate. The expense of tax preparation is an expense of administration of the Estate and will be taken as such on the Administration Account. More on Administration Accounts below.