An easy way to remember is:
Your FATHER had income when he was alive....SS/W2/1099R, DIV/INT/Misc...
Once he died, he is technically an ESTATE, an entity which may have to pay tax.
An ESTATE can earn income. For instance, if your father had rental property in his name only...the rental income now technically goes to his estate. If he had interest or dividend bearing accounts....before those accounts are closed and retitled in the beneficiaries name, the interest or divs go to his estate. You will find this out if you leave the accounts in his name, and interest and divs accumulate, and you go to take his name OFF and have only YOUR name on it. At the end of that year, you will get an interest statement in HIS name.If it's over 600.00, the estate has earned income to report on Fed. Form 1041.
When people say "just file his taxes and be done with it...." yes, you can file his personal income tax and be done with that part of his taxable life, just as you did when he was alive. Sign (EXEC) beside your name.
If his ESTATE has income, you must also file for that tax due or refund. The same income and deductions against personal income are used for the FORM 1041 .
From IRS.GOV :
"When someone dies, their assets become property of their estate. Any income those assets generate is also part of the estate and may trigger the requirement to file an estate income tax return. Examples of assets that would generate income to the decedent’s estate include savings accounts, CDs, stocks, bonds, mutual funds and rental property. IRS
Form 1041, U.S. Income Tax Return for Estates and Trusts, is required if the estate generates more than $600 in annual gross income.
The decedent and their estate are separate taxable entities. Before filing Form 1041, you will need to obtain a tax ID number for the estate. An estate’s tax ID number is called an “employer identification number,” or EIN, and comes in the format 12-345678X. You can
apply online for this number. You can also apply by FAX or mail; see
How to Apply for an EIN."
Please note that the Federal Estate INCOME TAX return is NOT the Federal ESTATE TAX return ( which is the one that dictates the millions one can inherit BEFORE they have to file an ESTATE tax form).
Remember that when someone dies with an account that is jointly titled with someone else, the interest and divs still go to the main person as it always did. In order to get it into YOUR name only, you will need to switch the names using the documents in my previous note. If your Dad's ESTATE generates more than 600. in income, you'd use Form 1041 until the estate is officially closed. ( All items dispursed, sold, retitled, or whatever).
It sounds a little confusing, but if you have been doing your parent's taxes, it really isn't that difficult to do Form 1041. You will need what they call the "Employer Identification Number" ( Even though your dad was NOT an emploer-thats just what the IRS calls it!). Very easy to apply.
In the search bar on IRS.GOV enter Death of Taxpayer and it will pull up all these topix.
Hopefully your dad's estate is relatively simple. I did all these forms, plus the Schedule D1041 and the K form for my Mom. It took time, but I took my time and got it done. She had accounts titled jointly and a small home that I sold for a loss that my sister and I will now consume on our own taxes as beneficiaries.
I actually enjoy learning the tax process...and I know people who did NOT take the loss on property they inherited because they did NOT file the 1041, Schedule D1041 and K forms. Thier loss!!!!!
