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Did you file taxes for parent for year they passed in?
Old 01-20-2017, 05:29 PM   #1
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Did you file taxes for parent for year they passed in?

My dad died last year. The tax person who has done his taxes for last three years said I need to do two tax returns for him. His taxes up to date of death and an estate tax return that would create tax forms for my brother and I showing taxes due while estate was in probate (5months).

Has anyone else had to do this? The estate is below the amount estate taxes would be due. Each tax return is 500.00 but I don't want to deal with any tax issues later if this is correct...

Thanks.
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Old 01-20-2017, 05:38 PM   #2
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The tax person is correct. Your Dad owes the tax on income earned through the date of death. The estate will owe taxes on the income earned after. Be careful, you can choose the year end of the estate, and it often is advantageous to select a January year end to delay the taxes. If the estate is significant, it can be worthwhile to spend a bit of change to have the tax guy run numbers to select the right year end.
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Old 01-20-2017, 05:39 PM   #3
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Oh yeah, I know.

The year Pops died I had a CPA do it because I had no clue. There was a trust involved and the CPA did 6 returns for me. 2 for me (Fed and State), 2 for him and 2 for the trust. I think it cost $3500.

That's one reason I don't mind paying for Turbo Tax. I could buy TT for $80 a year for the rest of my life and it wouldn't be as much as the CPA charged for one year.
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Old 01-20-2017, 05:46 PM   #4
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Yep, it takes 2 tax returns. And you have to get a second tax number assigned to the estate. Remember time is of the essence as the tax rate on estates is higher than on individuals.

Most simple estates without real estate can be often settled quickly without going through probate. Pay any outstanding debts, pay the income taxes up until their death and the survivors split what's left. That's quick and easy.

My mother left us a lake house, and it required we go through probate. She had no debts, and it was a simple process. But we still had to file 2 tax returns. And fortunately her business was simple enough where we didn't have to pay any accountant to file the taxes.
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Old 01-20-2017, 05:50 PM   #5
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That's what I did when my mom passed away. There's a personal tax return for their last year and an a final tax return for the estate.

The estate tax return can be more complex, depending on the assets left behind. I did most of it, but ended up having to pay a tax accountant because I couldn't figure out how to properly create K-1 forms for the heirs. There were losses from the estate that all the heirs received. In our case, it was around $400 to have the tax accountant take care of the returns. Easy money for him, since I handed him a stack of pre-filled IRS forms, but I was happy to have someone with experience look it over and deal with the K-1s.
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Old 01-20-2017, 06:03 PM   #6
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That's what I did when my mom passed away. There's a personal tax return for their last year and an a final tax return for the estate.

The estate tax return can be more complex, depending on the assets left behind. I did most of it, but ended up having to pay a tax accountant because I couldn't figure out how to properly create K-1 forms for the heirs. There were losses from the estate that all the heirs received. In our case, it was around $400 to have the tax accountant take care of the returns. Easy money for him, since I handed him a stack of pre-filled IRS forms, but I was happy to have someone with experience look it over and deal with the K-1s.
Note that turbotax business will do 1041s and their associated k1s. When I handled my parents estates I used turbotax to do the returns. The main issue is how much income is needed. In my case the lawyer handling the estate was also a CPA so he reviewed the first years return and I just followed the first return for subsequent years. (If there is a will/trust document it depends on how it is worded).
For the personal 1040 there is a line in turbotax that you can check to give the date of death also.
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Old 01-20-2017, 06:51 PM   #7
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My Dad passed away last summer, but my Mom is still living. I'm planning to help Mom do their joint tax return next month as Dad always did it with TurboTax.

Do we also need to do an estate tax return for Dad?
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Old 01-20-2017, 07:54 PM   #8
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My Dad passed away last summer, but my Mom is still living. I'm planning to help Mom do their joint tax return next month as Dad always did it with TurboTax.

Do we also need to do an estate tax return for Dad?
It will depend on how much money the estate makes. Typically an estate has a 600 exemption. Now if you open probate process the lawyer should be able to help. Any accounts held as joint tenants with the right of sponsorship will not give income to the estate but to the survivor.
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Old 01-20-2017, 08:03 PM   #9
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It will depend on how much money the estate makes. Typically an estate has a 600 exemption. Now if you open probate process the lawyer should be able to help. Any accounts held as joint tenants with the right of sponsorship will not give income to the estate but to the survivor.
Thanks, I think we are fine. Everything was in joint accounts and Mom is the sole heir.
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Old 01-20-2017, 08:22 PM   #10
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Keep in mind a Federal Estate Tax return (applies only to large $ estates) is something completely different from an estate's Federal Income Tax return (which applies to all estates).
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Old 01-20-2017, 08:40 PM   #11
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Yep. SS and pension forms came today. Wife's Brother passed in June and as only heirs We expect to file his return for 2016 thru summer.

heh heh heh - Probate is completed.
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Old 01-20-2017, 10:49 PM   #12
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If an estate is simple, not trusts and stuff, you would expect it to be pretty simple.
I'll bet CPA's find this situation a gold mine, as the family doesn't expect it, and feels helpless.
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Old 01-21-2017, 05:10 AM   #13
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Originally Posted by retired2015b2d View Post
My dad died last year. The tax person who has done his taxes for last three years said I need to do two tax returns for him. His taxes up to date of death and an estate tax return that would create tax forms for my brother and I showing taxes due while estate was in probate (5months).

Has anyone else had to do this? The estate is below the amount estate taxes would be due. Each tax return is 500.00 but I don't want to deal with any tax issues later if this is correct...

Thanks.
yep we had to do it. we hired a cpa to do his taxes. the estate tax form is a huge pita and part of my job is to do tax forms for a living
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Old 01-21-2017, 05:47 AM   #14
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Thank you for all the responses. I feel much better now knowing that the tax returns needs to be done, and the money well spent for a tax expert.
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Old 01-21-2017, 06:25 AM   #15
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I was fully capable of doing taxes for my Dad's estate, but I chose to spend some $$ to have pros do it.

It just makes it more transparent to the beneficiaries and helps build trust during the settlement process. It may be a "gold mine" for the pros. Fine. But should any issue with the IRS occur, then it is their problem. You don't need more hassle from the beneficiaries when stuff happens. And stuff happens during a settlement.
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Old 01-21-2017, 09:13 AM   #16
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My Dad died in April, 2016. His assets (trad ira, checking account, navy life insurance policy) were all left to my sister and I as beneficiaries or Payable On Death. No trusts, nothing to go through probate.

I'm filing his last tax return myself. It all seems very simple and his medical costs were so high that he owes no tax to fed or state. He withdrew more than his RMD in 2016 so no issues with that.
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Old 01-21-2017, 12:01 PM   #17
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I'm not sure I understand this, it must be for persons with sizable estates. my FIL passed this past October. His house is in a Trust, yet to be sold. Everything else totals less than $5k of assets (cash and furnishings). There was no probate. You mean to say there has to be his final income tax for Jan thru Oct, and then something for less than $5k of belongings?

I sure hope we get this tax system cleaned the hell up.
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Old 01-21-2017, 12:12 PM   #18
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I'm not sure I understand this, it must be for persons with sizable estates. my FIL passed this past October. His house is in a Trust, yet to be sold. Everything else totals less than $5k of assets (cash and furnishings). There was no probate. You mean to say there has to be his final income tax for Jan thru Oct, and then something for less than $5k of belongings?
In Maryland at least, the answer is yes. The estate has to file a tax return even if no taxes are owed. Other states may vary of course.
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Old 01-21-2017, 12:24 PM   #19
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My folks had 2 trusts, one for Ma and one for Pops. I don't know why, and neither did Pops. When Ma died, her trust was supposed to get a Fed ID number also which neither I nor Pops knew about. The broker told me and he finally got one through an attorney.

He used to do his own taxes too until the trust needed to file returns. Trusts are easy until someone dies.
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Old 01-21-2017, 01:35 PM   #20
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It just makes it more transparent to the beneficiaries and helps build trust during the settlement process. It may be a "gold mine" for the pros. Fine. But should any issue with the IRS occur, then it is their problem. You don't need more hassle from the beneficiaries when stuff happens. And stuff happens during a settlement.

A big +1.

In our case, the extra amount for the tax pro wasn't that much and it's paid for out of the estate, so the cost is split between the beneficiaries.

And if something isn't right, you protect yourself from the beneficiaries of the estate.
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