Final Return For Decedent

A final return for decedent refers to a tax return filed for an individual in the year of that person's death. Taxpayers who die in any given year will have one final tax return filed on their behalf for this year. A copy of the death certificate must be attached to the return for it to be processed.

With the final return for decedent, the executor or personal representative is usually responsible for filing that tax return. The return pertains solely to income taxes and should not be confused with an estate tax return. Income received after the taxpayer's death is also reported on this return.

This final return is typically prepared in much the same way as when the deceased person was alive, according to the IRS. Any income earned that filing year should be noted on the Form 1040, or, if applicable, 1040-A or 1040-EZ, along with any credits or deductions to which they may be entitled.

If the decedent’s final return shows that a tax is due, their executor or representative should submit a payment via check, debit card, credit card or electronic funds transfer. As with normal returns, the filer may qualify for certain payment plans or installment agreements, say IRS officials. If the decedent is owed refund for individual income tax, the executor may claim it using IRS Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer.

As the Tax Adviser website points out, even if the filing of a final decedent's final return may be unfamiliar or uncomfortable for some tax preparers, it is "better to take control of the situation and make the final Form 1040 a powerful and effective part of the post-mortem planning process."

Among the many points of advice offered by Karen S. Cohen, CPA, she noted that practitioners should first be sure to stop making estimated tax payments: "Once a taxpayer dies, he or she is no longer required to make estimated tax payments. Many well-meaning family members continue to submit the decedent’s quarterly estimated tax vouchers, which is not necessary and may require taking funds out of an investment portfolio, where they could otherwise be growing and earning income for as long as a year," she wrote.

As for the question of who should sign the return, she said: "A surviving spouse filing a joint return need not do anything special. He or she will just sign as the surviving spouse. If someone other than a surviving spouse has been appointed by a court to administer the decedent’s affairs, that executor or personal representative should sign the return and attach a copy of the certificate that shows the official appointment.

Relatedly, a spouse can still file a joint return with a decedent for the year of death, said Cohen, but noted that, "if the decedent incurred significant medical expenses during his or her last illness and passed away early enough in the year to be reporting substantially less income, consider filing separately if it would save tax by allowing medical expenses to exceed the adjusted gross income threshold for deduction and create a better overall result for the surviving spouse and family."