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Death by Taxes, Part 2:

November 14, 2019

An introduction to the world of taxes in the year of death.

Aunt Matilda passed peacefully in her sleep on June 25th, 2019. In the weeks following, as the family was cleaning out Matilda’s home, Frank began to panic about the tax consequences of his mother’s passing. Do I need to file a tax return for my mom? What deadlines do I need to worry about? What happens when we sell the home? Can I just assume her investments, tax-free? Don’t worry Frank, we are here to help.

If you missed Part 1 of this series, check it out now to learn about the various tax forms that may be required in the year of death. In Part 2, we discuss the deadlines for each of those forms.

Question 2: What deadlines do I need to worry about?

When a taxpayer dies, there are multiple deadlines of which the surviving family members and/or executor need to be aware. The deadlines can vary based on the date of death.

Form 1040: 1040 is due on the same day, regardless of whether the taxpayer is alive or passed during the year. Since Matilda passed in June of 2019, her 2019 1040 would be due April 15th, 2020. However, if she had passed January 1st, 2019, her return would still be due on April 15th, 2020, although it might not meet the income requirements. 1040 should report all income from the beginning of the year through to the date of death.

Form 706: The 706, if required, is due 9 months after the date of death, with an optional 6 month extension. Based on that deadline, Frank would have until March 25th, 2020 to file Form 706. Although Frank can file for an extension allowing an additional 6 months to file the return, this does not extend the date the tax payment is due.

Form 1041: This deadline gets a little tricky because it can change depending on the year-end chosen. For example, 1041 can elect to have a calendar year-end. For Matilda, the initial 1041 will report income from June 26th through December 31st. It will be due on April 15th, 2020. After that, 1041 will report income for the entire 2020 calendar year and will be due on April 15th each year. If instead, the estate elects a fiscal year, the initial 1041 would cover from the date of death through the month before the date of death in the following year. In Matilda’s case, the fiscal year would run from June 25th, 2019 through May 31st, 2020. After the initial year, the fiscal period would be June 1st through May 31st. In either case, the return is still due the 15th day of the fourth month after the year-end, or September 15th.

Based on his mother’s passing, Frank would need to file returns in April, March, and either May or September of 2020. It looks like Frank has a busy year ahead of him.

If you have any questions regarding anything you’ve seen in this article please contact attorney Diane Tiveron or Sarah DesJardins, CPA at 716-636-7600.

Be on the lookout for Part 3 of this series, where we will discuss the tax consequences for sale of Matilda’s home.