Death and Taxes

January has now passed, and like many households around the country we have a stack of "tax papers" on the dinning room table at my home.  We all know that April 15th is approaching, and that means a flurry of numbers, forms, envelopes, and addresses to the IRS.

But the "living" are not the only ones with tax matters to attend to this time of year, even those recently departed have papers the IRS is eager to see.  And that translates into a responsibility for the deceased's personal representative, trustee, and or trusted family or friend.  Yes, even death does not release you from the income tax deadline.

Examples usually help drive home an issue.  Here is one from my own life.  My father died on September 18, 2009.  So, we had to make sure a final Income Tax Return was filed for him for January 1, 2009 through September 18, 2009, AND, if his estate had earned more than $600 from September 19, 2009 through December 31, 2009, the estate would also be required to file a return.

I presented this scenario at a seminar last night and saw a few puzzled faces.  How on earth does an estate earn money....the person is dead!  Ah, but an estate can make money.  Interest on CDs, stock dividends, sale of property, stock sales, royalties, etc.

No matter how small an estate is, I always advise the personal representative to consult with a CPA to make sure no income tax or other tax issues need to be addressed.  The IRS may be slow at times, but they are not forgiving.  Due your homework and tie up loose ends.  Happy tax season everyone!