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Income tax filings after death: Important information

Whenever someone dies, the estate needs to settle the decedent's outstanding debts -- including taxes -- before the remaining proceeds can be distributed. This means that the estate executor must fill out and submit to the IRS the final Form 1040, which will cover all taxes owed by the decedent from the date of Jan. 1 until the date of death. If the decedent died in 2018, then the tax filing is due by the standard 2019 filing date for 2018 taxes.

Sometimes it's not entirely straightforward how to prepare and file the last tax return for an estate, which is why many executors choose to work with a tax planning professional when preparing the final tax filing.

Here are two important things to know about filing tax returns after a death:

Medical expenses: Certain medical expenses could be outstanding after the death of your loved one. Executors will need to decide how to treat these expenses on the final tax return. For example, you might choose to deduct these unpaid expenses from the final tax return, but you can only do so for the amounts that exceed 7.5 percent of the decedent's adjusted gross income for those who pass away after the age of 65 and 10 percent of the adjusted gross income for those who pass away before the age of 65.

Income tax returns for the estate: In addition to filing an income tax return for the decedent, you may also need to file an income tax return related to the estate itself. The "estate income tax return" is separate from the individual income tax return and it relates to income that the estate itself generates after the death of the decedent. The first income tax year for the estate begins after the individual dies. Executors will use the Form 1041 to file these taxes with the IRS.

Do you have further questions about income taxes relating to someone who recently passed away and his or her estate? You may want to learn more about federal tax law and Illinois estate law as it applies to your situation.

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