Advice on tax software for deceased parent?

[cheyrl]

My mother died in February of 2021. Since she had very little income for the year (<2000), we didn't think that we would have to file taxes unless we wanted to get a very small refund.
However, the lawyer helping us through probate said that we can't close out the estate until we do estate taxes because of the sale of her home. Her home was only worth $100,000 and that's what we sold it for, a simple transaction with a neighbor.
I always do our taxes with TurboTax Basic, but it seems like that isn't going to work for Mom's taxes, it doesn't have the 1041.
Does anybody know of inexpensive software that would allow me to get this done? Thanks for any input.

[PaunchyPirate]

Quote:

Originally Posted by cheyrl My mother died in February of 2021. Since she had very little income for the year (<2000), we didn't think that we would have to file taxes unless we wanted to get a very small refund. However, the lawyer helping us through probate said that we can't close out the estate until we do estate taxes because of the sale of her home. Her home was only worth $100,000 and that's what we sold it for, a simple transaction with a neighbor. I always do our taxes with TurboTax Basic, but it seems like that isn't going to work for Mom's taxes, it doesn't have the 1041. Does anybody know of inexpensive software that would allow me to get this done? Thanks for any input.

Why not just upgrade to the TurboTax version that supports Form 1041. Then at least you'd be familiar with the software. It looks like you need TurboTax Business to get form 1041.

[Jerry1]

Quote:

Originally Posted by PaunchyPirate Why not just upgrade to the TurboTax version that supports Form 1041. Then at least you'd be familiar with the software. It looks like you need TurboTax Business to get form 1041.

I agree with this.

However, I would probably just pay someone to do it. My MIL has a simple trust and the person who does my SIL’s taxes does the trust tax return for $500. I figured this would be better than me figuring out how to do a trust return and more important, if any issues arose, I wouldn’t have to defend my work with other family members. That right there was worth the fee to have someone else do it.

[cheyrl]

I'd prefer to avoid paying for the updated software if I don't need it.

Looking at the IRS website, it seems like I don't have to file if the income of the estate was less than $600. It was, but how do I prove it? Not sure if that makes sense, my head is spinning from reading IRS publications.

[Jerry1]

Quote:

Originally Posted by cheyrl I'd prefer to avoid paying for the updated software if I don't need it. Looking at the IRS website, it seems like I don't have to file if the income of the estate was less than $600. It was, but how do I prove it? Not sure if that makes sense, my head is spinning from reading IRS publications.

If it was less than $600 and you’re sure that because of that you don’t have to file, just don’t file. There’s nothing to prove. If the IRS thinks you should file, they’ll tell you why they think the income was more than $600. For example, let’s say you got a 1099 for $400. Then assume there was actually another one for $300 that you never received. In the IRS letter, they would tell you that they see $700 of income. You’d then have to figure out where that came from, etc. But, if it’s not there, the IRS is not going to come to you asking you to prove you’re under $600. If they wanted that, they’d require you to file no matter what level of income.

Make sure you’re correct on the $600 and if you are, feel free to move on.

[SecondCor521]

Quote:

Originally Posted by Jerry1 If it was less than $600 and you’re sure that because of that you don’t have to file, just don’t file. There’s nothing to prove. If the IRS thinks you should file, they’ll tell you why they think the income was more than $600. For example, let’s say you got a 1099 for $400. Then assume there was actually another one for $300 that you never received. In the IRS letter, they would tell you that they see $700 of income. You’d then have to figure out where that came from, etc. But, if it’s not there, the IRS is not going to come to you asking you to prove you’re under $600. If they wanted that, they’d require you to file no matter what level of income. Make sure you’re correct on the $600 and if you are, feel free to move on.

I agree with the above.

The only potential fly in the ointment I can see is if a 1099-S were generated from the sale of the home. If so, the IRS will assume a basis of $0, sales proceeds of $100K, and thus a capital gain of $100K. Since $100K > $600, they'll expect a return.

OP could contact the closing agent / escrow company to see if they generated a 1099-S. Or look through the closing paperwork, since it's sometimes put in there.

If there was a 1099-S, then the solution is to file a tax return with a Schedule D on it showing a cost basis of $100K (assuming that's the value as of the date of death - a home will typically get a step up in basis), sales proceeds of $100K, and no gain.

OP, if the only transaction after her passing is the house sale, or if there are only a few tax items, I'd consider filling out the 1041 by hand. You'll need a 1041, and a 1041 Schedule D. The 1041 Schedule D differs from a 1040 Schedule D but it's similar. You might also need whatever is the logical equivalent of a 1041 Form 8949, not sure offhand.

[cheyrl]