How to File Taxes for a Lost Loved One—Plus What To Do if They Owe the IRS Money
From gathering documents to handling IRS debt after death, here's your complete tax-filing roadmap
It’s officially tax season here in the United States, and many Americans are going to be faced with filing paperwork for a lost loved one. But how exactly do you do it? And what if the person you’re filing for owes the Internal Revenue Service (IRS) money and has no estate? We break it all down below.
What to know about filing a lost loved one’s taxes
When it comes to filing taxes for a lost loved one, there are several steps to take. According to Delaney Haley, a certified trust and fiduciary advisor and head of customer care the estate settlement company Alix, the first is to alert the person’s local Social Security Office as soon as possible.
“This formally informs the agency of your loved one’s passing and allows them to stop all Social Security payments, which helps prevent fraudulent benefit claims,” she explains.
Then, once it’s time to actually file the taxes, Haley advises gathering important paperwork from the late loved one, including their W-2s, 1099s, bank statements, prior returns and the death certificate. If you have trouble finding these documents, she recommends checking with the executor.
“Once appointed, the executor has the legal authority to request statements on financial accounts and access necessary records,” she explains. “The executor can also contact the IRS to request tax transcripts using Form 4506-T or full copies of past tax returns using Form 4506.”
Once all that’s gathered up, you can begin to file the person’s taxes. Just be sure to file a final tax return, which Haley says “informs the IRS of their passing. This is done by marking the return ‘deceased’ and including the date of death.”
These rules differ if the deceased person is a spouse.
“If the taxpayer was married, the spouse may file a joint return for the year of death, claiming the full standard deduction and using joint-return rates,” Lisa Greene-Lewis, a CPA with Turbotax, explains. “If the surviving spouse has a qualifying dependent and meets other requirements, they can file as a qualifying widow/widower for the two years following a spouse’s death.”
What to do if the deceased person owes money to the IRS
In some cases, when you file taxes for a deceased loved one, the IRS will say he or she owes money. Don’t worry, says Greene-Lewis. Most of the time, the money will come out of the deceased’s estate, however if the amount there isn’t enough to cover the debt, the IRS might just cancel it.
Most of the time executors and children are not responsible for the fees, but if they are legally tied to the debt in any way, that could change. Examples of this include being a co-signer on an account.
If that happens, and you can’t pay the money owed, there is a chance the IRS will let the debt remain unpaid. But that depends on your financial situation and state of residence, so it’s best to talk to financial experts about your options. Doing so will help ensure that the debt is allowed to remain unpaid and help you avoid IRS fees and debt collectors.
There are also ways to minimize how much you could owe. Greene-Lewis recommends gathering receipts for any deductible expenses so that you can maximize the descendant’s deductions on their final return, which could reduce or even eliminate any taxes owed.
What to do if the deceased person gets a refund from the IRS
If the deceased is owed a refund from the IRS, the IRS will issue that money to the surviving spouse, says Haley.
“If the court-appointed executor files the final return and includes a copy of their letters of testamentary [a document that formally authorizes someone as an executor], the refund will be issued to the estate to be deposited and distributed by the executor,” she continues.
If the person claiming the refund is not a spouse, they will need to complete a 1310 form and send it, along with a death certificate and proof of authority, to the IRS who will then review it and send the money out to the correct person, says Haley.
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