21 May 2015

Facing Mortality: Death and Taxes

My housemate's mother passed away in July 2014 and my housemate is acting as the estate's personal representative. This post is inspired by her experience.

So my housemate went to do her taxes this April and discovered too late that she had mis-understood some of the instructions about dealing with her mom's estate and paying the taxes. Here are the key things she learned at the last minute that never would have occurred to me:

  • Even if probate has not been closed, the personal representative must give a report to the beneficiaries so they can include that information in their taxes. The important point is that if an estate/probate is open across the end of a year, there are still tax reporting requirements and they may have an earlier deadline (like Jan 30th). 
  • The form for reporting the decedent's taxes has a number very similar to the usual 1040 (I think she said it is a 1041). It can be very easy to mis-read that in the information the IRS sends you and think that you will be dealing with a very similar/standard form that most tax paying adults are used to. However, it is apparently very different and not something to attempt on April 14th. 
  • Even if the person did not leave a large estate you want to make sure all of the tax forms get filled out on time and get to the heirs on schedule. See above, deadlines may come earlier in the year than you are used to. 
Per my housemate: learn from her and if you ever have to act as a personal representative do not put off finding out what the tax reporting requirements are-- there maybe deadlines that are much earlier than the normal April 15th that we (in the US) are all used to.

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