Family Death During Year

Today TaxMama hears from Fran in the Tax Parlor, who tells us. “My mother died in 2006 and received Social Security monthly, getting about $700 per month. In addition, she had investments totaling about $60,000 that paid less than $5,000. Do I need to file a return? If so, what info and forms do I need? Can I do this online?”

Dear Fran,

So sorry to learn about your mother. I’ll bet you miss her. Yes, you should file. Just to close the years and get everything settled.

1) File a Form 1040 or 1040A for your mother covering the income received during the period from January 1 to the date of her death.
http://www.irs.gov/pub/irs-pdf/f1040.pdf

2) File a Form 1041 and check the box that says Decedent’s Estate at the top left corner of the form. This will cover income received from the date of death to the end of the year – or until the assets were distributed to her heirs. http://www.irs.gov/pub/irs-pdf/f1041.pdf

You will need a K-1 (or K-1s) with the Form 1041. You will need a separate K-1 for each person who inherits and receives a part of the assets and income from those assets. In the meantime, if you need time to get these done, file a Form 4868 to get an extension for your mother. http://www.irs.gov/pub/irs-pdf/f4868.pdf

And file a Form 7004 to get an extension of time to file the Form 1041. http://www.irs.gov/pub/irs-pdf/f7004.pdf

Most likely, your mother will not owe any taxes.

HOWEVER, since the interest income from those K-1s gets reported on the tax returns of the heirs, they may owe additional income tax. So have them all file extensions (Form 4868) for their/your tax returns.

If they’ve already filed their returns, they can amend (Form 1040X) within 3 years. Or wait for IRS to send the bill in about 15 months.

And no, I’m afraid there is no way for you to prepare the 1041s online at this time.

And remember, you’ll find answers to lots of questions about recent deaths and other tax information, free. Where? At TaxMama.com

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  • IRS Form 1040 :: Individual Income Tax Return
  • IRS Form 1041 :: Tax Return for Estates and Trusts
  • IRS Form 4868 :: Automatic Extension of Time to File Individual Tax Returns
  • IRS Form 7004 :: Automatic Extension of Time to File Business and Other Tax Returns

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