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1040 easy 3. 1040 easy   Self-Employment Tax Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Must Pay Self-Employment Tax?Employed by a U. 1040 easy S. 1040 easy Church Effect of Exclusion Members of the Clergy Income From U. 1040 easy S. 1040 easy Possessions Exemption From Social Security and Medicare Taxes Topics - This chapter discusses: Who must pay self-employment tax, and Who is exempt from self-employment tax. 1040 easy Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 517 Social Security and Other Information for Members of the Clergy and Religious Workers Form (and Instructions) Form 1040-PR Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia Form 1040-SS U. 1040 easy S. 1040 easy Self-Employment Tax Return Form 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners Schedule SE (Form 1040) Self-Employment Tax See chapter 7 for information about getting these publications and forms. 1040 easy Who Must Pay Self-Employment Tax? If you are a self-employed U. 1040 easy S. 1040 easy citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad. 1040 easy The self-employment tax is a social security and Medicare tax on net earnings from self- employment. 1040 easy You must pay self-employment tax if your net earnings from self-employment are at least $400. 1040 easy For 2013, the maximum amount of net earnings from self-employment that is subject to the social security portion of the tax is $113,700. 1040 easy All net earnings are subject to the Medicare portion of the tax. 1040 easy Employed by a U. 1040 easy S. 1040 easy Church If you were employed by a U. 1040 easy S. 1040 easy church or a qualified church-controlled organization that chose exemption from social security and Medicare taxes and you received wages of $108. 1040 easy 28 or more from the organization, the amounts paid to you are subject to self-employment tax. 1040 easy However, you can choose to be exempt from social security and Medicare taxes if you are a member of a recognized religious sect. 1040 easy See Publication 517 for more information about church employees and self-employment tax. 1040 easy Effect of Exclusion You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion. 1040 easy Example. 1040 easy You are in business abroad as a consultant and qualify for the foreign earned income exclusion. 1040 easy Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. 1040 easy You must pay self-employment tax on all of your net profit, including the amount you can exclude from income. 1040 easy Members of the Clergy If you are a member of the clergy, you are treated as self-employed for self-employment tax purposes. 1040 easy Your U. 1040 easy S. 1040 easy self-employment tax is based upon net earnings from self-employment figured without regard to the foreign earned income exclusion or the foreign housing exclusion. 1040 easy You can receive exemption from coverage for your ministerial duties if you conscientiously oppose public insurance due to religious reasons or if you oppose it due to the religious principles of your denomination. 1040 easy You must file Form 4361 to apply for this exemption. 1040 easy This subject is discussed in further detail in Publication 517. 1040 easy Income From U. 1040 easy S. 1040 easy Possessions If you are a U. 1040 easy S. 1040 easy citizen or resident alien and you own and operate a business in Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, or the U. 1040 easy S. 1040 easy Virgin Islands, you must pay tax on your net earnings from self-employment (if they are $400 or more) from those sources. 1040 easy You must pay the self-employment tax whether or not the income is exempt from U. 1040 easy S. 1040 easy income taxes (or whether or not you otherwise must file a U. 1040 easy S. 1040 easy income tax return). 1040 easy Unless your situation is described below, attach Schedule SE (Form 1040) to your U. 1040 easy S. 1040 easy income tax return. 1040 easy If you do not have to file Form 1040 with the United States and you are a resident of any of the U. 1040 easy S. 1040 easy possessions listed in the preceding paragraph, figure your self-employment tax on Form 1040-SS. 1040 easy Residents of Puerto Rico may file the Spanish-language Formulario 1040-PR. 1040 easy If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If you are enclosing a check or money order, file your return with the: Department of the Treasury P. 1040 easy O. 1040 easy Box 1303 Charlotte, NC 28201-1303 Exemption From Social Security and Medicare Taxes The United States may reach agreements with foreign countries to eliminate dual coverage and dual contributions (taxes) to social security systems for the same work. 1040 easy See Bilateral Social Security (Totalization) Agreements in chapter 2 under Social Security and Medicare Taxes. 1040 easy As a general rule, self-employed persons who are subject to dual taxation will only be covered by the social security system of the country where they reside. 1040 easy For more information on how any specific agreement affects self-employed persons, contact the United States Social Security Administration, as discussed under Bilateral Social Security (Totalization) Agreements in chapter 2. 1040 easy If your self-employment earnings should be exempt from foreign social security tax and subject only to U. 1040 easy S. 1040 easy self-employment tax, you should request a certificate of coverage from the U. 1040 easy S. 1040 easy Social Security Administration, Office of International Programs. 1040 easy The certificate will establish your exemption from the foreign social security tax. 1040 easy Send the request to the: Social Security Administration Office of International Programs P. 1040 easy O. 1040 easy Box 17741 Baltimore, MD 21235-7741 Prev  Up  Next   Home   More Online Publications
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1040 easy Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. 1040 easy Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. 1040 easy An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. 1040 easy In general, an executor and an administrator perform the same duties and have the same responsibilities. 1040 easy For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. 1040 easy It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. 1040 easy Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. 1040 easy The personal representative also must perform the following duties. 1040 easy Apply for an employer identification number (EIN) for the estate. 1040 easy File all tax returns, including income, estate and gift tax returns, when due. 1040 easy Pay the tax determined up to the date of discharge from duties. 1040 easy Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. 1040 easy If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. 1040 easy Penalty. 1040 easy   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. 1040 easy Reliance on an agent (attorney, accountant, etc. 1040 easy ) is not reasonable cause for late filing. 1040 easy It is the personal representative's duty to file the returns for the decedent and the estate when due. 1040 easy Identification number. 1040 easy   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. 1040 easy You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. 1040 easy You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. 1040 easy   You can get an EIN by applying online at www. 1040 easy irs. 1040 easy gov (click on "Apply for an EIN Online" under the Tools heading). 1040 easy Generally, if you apply online, you will receive your EIN immediately upon completing the application. 1040 easy You can also apply using Form SS-4, Application for Employer Identification Number. 1040 easy Generally, if you apply by mail, it takes about 4 weeks to get your EIN. 1040 easy See the form instructions for other ways to apply. 1040 easy   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. 1040 easy After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. 1040 easy As the personal representative handling the estate, you must furnish this identification number to the payer. 1040 easy For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. 1040 easy If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. 1040 easy   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). 1040 easy Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. 1040 easy    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. 1040 easy Also do not use it to make estimated tax payments for a tax year after the year of death. 1040 easy Penalty. 1040 easy   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. 1040 easy You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. 1040 easy Notice of fiduciary relationship. 1040 easy   The term fiduciary means any person acting for another person. 1040 easy It applies to persons who have positions of trust on behalf of others. 1040 easy A personal representative for a decedent's estate is a fiduciary. 1040 easy Form 56. 1040 easy   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. 1040 easy Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. 1040 easy See the Instructions for Form 56 for filing requirements and other information. 1040 easy   File Form 56 as soon as all the necessary information (including the EIN) is available. 1040 easy It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. 1040 easy The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. 1040 easy Termination of fiduciary relationship. 1040 easy   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. 1040 easy See Form 56 and its instructions for more information. 1040 easy   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. 1040 easy See below for a discussion of these forms. 1040 easy Request for prompt assessment (charge) of tax. 1040 easy   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. 1040 easy However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. 1040 easy This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. 1040 easy This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. 1040 easy This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. 1040 easy Form 4810. 1040 easy   Form 4810 can be used for making this request. 1040 easy It must be filed separately from any other document. 1040 easy   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. 1040 easy You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. 1040 easy This applies even though the returns were filed before the decedent's death. 1040 easy Failure to report income. 1040 easy   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. 1040 easy However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. 1040 easy Request for discharge from personal liability for tax. 1040 easy   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. 1040 easy The request must be made after the returns for those taxes are filed. 1040 easy To make the request, file Form 5495. 1040 easy For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. 1040 easy   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. 1040 easy If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. 1040 easy If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. 1040 easy    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. 1040 easy Insolvent estate. 1040 easy   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. 1040 easy Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. 1040 easy The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. 1040 easy The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. 1040 easy Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. 1040 easy Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. 1040 easy If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. 1040 easy If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. 1040 easy If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. 1040 easy Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. 1040 easy A surviving spouse, under certain circumstances, may have to file the returns for the decedent. 1040 easy See Joint Return, later. 1040 easy Return for preceding year. 1040 easy   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. 1040 easy The return for that year will be a regular return and the personal representative must file it. 1040 easy Example. 1040 easy Samantha Smith died on March 21, 2013, before filing her 2012 tax return. 1040 easy Her personal representative must file her 2012 return by April 15, 2013. 1040 easy Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. 1040 easy Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 1040 easy If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. 1040 easy If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. 1040 easy Third party designee. 1040 easy   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. 1040 easy This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. 1040 easy It also allows the designee to perform certain actions. 1040 easy See the Instructions for Form 1040 for details. 1040 easy Signature. 1040 easy   If a personal representative has been appointed, that person must sign the return. 1040 easy If it is a joint return, the surviving spouse must also sign it. 1040 easy If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. 1040 easy ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 1040 easy ” Paid preparer. 1040 easy   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. 1040 easy See the Form 1040 instructions for details. 1040 easy When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. 1040 easy A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. 1040 easy However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. 1040 easy The tax return must be prepared for the year of death regardless of when during the year death occurred. 1040 easy Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. 1040 easy A tax return for a decedent can be electronically filed. 1040 easy A personal representative may also obtain an income tax filing extension on behalf of a decedent. 1040 easy Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. 1040 easy Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. 1040 easy It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. 1040 easy In general, filing status depends on whether the decedent was considered single or married at the time of death. 1040 easy See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. 1040 easy Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. 1040 easy Also, the decedent may be entitled to other credits that result in a refund. 1040 easy These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. 1040 easy Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. 1040 easy   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. 1040 easy   If the personal representative is filing a claim for refund on Form 1040X, Amended U. 1040 easy S. 1040 easy Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. 1040 easy Example. 1040 easy Edward Green died before filing his tax return. 1040 easy You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. 1040 easy You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. 1040 easy    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. 1040 easy Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. 1040 easy A new check will be issued in your name and mailed to you. 1040 easy Death certificate. 1040 easy   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. 1040 easy Instead, keep it for your records and provide it if requested. 1040 easy Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. 1040 easy S. 1040 easy Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. 1040 easy See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. 1040 easy Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. 1040 easy However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. 1040 easy This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. 1040 easy The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. 1040 easy A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. 1040 easy The filing status of the decedent in this instance is married filing a separate return. 1040 easy For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. 1040 easy Personal representative may revoke joint return election. 1040 easy   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. 1040 easy This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). 1040 easy The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. 1040 easy Relief from joint liability. 1040 easy   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. 1040 easy If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. 1040 easy For information on requesting this relief, see Publication 971, Innocent Spouse Relief. 1040 easy Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. 1040 easy The method of accounting regularly used by the decedent before death also determines the income includible on the final return. 1040 easy This section explains how some types of income are reported on the final return. 1040 easy For more information about accounting methods, see Publication 538, Accounting Periods and Methods. 1040 easy Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. 1040 easy Constructive receipt of income. 1040 easy   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. 1040 easy Include the interest income on the final return. 1040 easy   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. 1040 easy If the corporation customarily mailed its dividend checks, the dividend was includible when received. 1040 easy If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. 1040 easy Do not include the dividend in the final return. 1040 easy Accrual Method Generally, under an accrual method of accounting, income is reported when earned. 1040 easy If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. 1040 easy Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. 1040 easy A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. 1040 easy You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. 1040 easy For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). 1040 easy For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. 1040 easy If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. 1040 easy See U. 1040 easy S. 1040 easy savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. 1040 easy How to report. 1040 easy   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. 1040 easy Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. 1040 easy Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. 1040 easy Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. 1040 easy   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. 1040 easy    Note. 1040 easy If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. 1040 easy See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. 1040 easy Partnership Income The death of a partner closes the partnership's tax year for that partner. 1040 easy Generally, it does not close the partnership's tax year for the remaining partners. 1040 easy The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. 1040 easy To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. 1040 easy On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. 1040 easy The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 1040 easy The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. 1040 easy Example. 1040 easy Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. 1040 easy The partnership uses a tax year ending June 30. 1040 easy Mary died August 31, 2013, and her estate established its tax year through August 31. 1040 easy The distributive share of partnership items based on the decedent's partnership interest is reported as follows. 1040 easy Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). 1040 easy Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. 1040 easy S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. 1040 easy The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 1040 easy The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. 1040 easy Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. 1040 easy For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. 1040 easy For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. 1040 easy Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. 1040 easy For more information, see Publication 555, Community Property. 1040 easy HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. 1040 easy If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. 1040 easy The estate tax deduction, discussed later, does not apply to this amount. 1040 easy If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 1040 easy For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 1040 easy Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. 1040 easy The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. 1040 easy If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. 1040 easy The estate tax deduction, discussed later, does not apply to this amount. 1040 easy If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 1040 easy The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. 1040 easy This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. 1040 easy For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. 1040 easy Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. 1040 easy These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. 1040 easy Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. 1040 easy For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. 1040 easy Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. 1040 easy Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. 1040 easy This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. 1040 easy See Medical Expenses, later. 1040 easy Exemptions You can claim the decedent's personal exemption on the final income tax return. 1040 easy If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. 1040 easy Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. 1040 easy For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. 1040 easy Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. 1040 easy This includes expenses for the decedent, as well as for the decedent's spouse and dependents. 1040 easy Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. 1040 easy In that case medical expenses exceeding 7. 1040 easy 5% of AGI may be deducted. 1040 easy Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. 1040 easy Election for decedent's expenses. 1040 easy   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). 1040 easy However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. 1040 easy   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). 1040 easy You can deduct expenses incurred in the year of death on the final income tax return. 1040 easy You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. 1040 easy   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. 1040 easy 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). 1040 easy Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. 1040 easy Making the election. 1040 easy   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. 1040 easy The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. 1040 easy This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. 1040 easy Example. 1040 easy Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. 1040 easy Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. 1040 easy Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. 1040 easy Richard itemized his deductions when he filed his 2012 income tax return. 1040 easy The personal representative of the estate paid the entire $800 liability in August 2013. 1040 easy The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. 1040 easy 5% limit. 1040 easy The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. 1040 easy 5% limit. 1040 easy The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. 1040 easy Medical expenses not paid by estate. 1040 easy   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. 1040 easy If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. 1040 easy Insurance reimbursements. 1040 easy   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. 1040 easy The reimbursements are also includible in the decedent's gross estate. 1040 easy No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. 1040 easy These expenses may be deductible for estate tax purposes on Form 706. 1040 easy Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. 1040 easy A net operating loss on the decedent's final income tax return can be carried back to prior years. 1040 easy (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 1040 easy ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. 1040 easy At-risk loss limits. 1040 easy   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. 1040 easy   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. 1040 easy An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. 1040 easy An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. 1040 easy The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. 1040 easy For more information, see Publication 925, Passive Activity and At-Risk Rules. 1040 easy Passive activity rules. 1040 easy   A passive activity is any trade or business activity in which the taxpayer does not materially participate. 1040 easy To determine material participation, see Publication 925. 1040 easy Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. 1040 easy   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. 1040 easy Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. 1040 easy   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. 1040 easy Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. 1040 easy The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. 1040 easy   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. 1040 easy For more information, see Publication 925. 1040 easy Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. 1040 easy Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. 1040 easy Some of these credits are discussed next. 1040 easy Earned income credit. 1040 easy   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. 1040 easy If the allowable credit is more than the tax liability for the year, the excess is refunded. 1040 easy   For more information, see Publication 596, Earned Income Credit (EIC). 1040 easy Credit for the elderly or the disabled. 1040 easy   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. 1040 easy The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. 1040 easy   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. 1040 easy Child tax credit. 1040 easy   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. 1040 easy You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. 1040 easy For more information, see the Instructions for Form 1040. 1040 easy Adoption credit. 1040 easy   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. 1040 easy   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. 1040 easy See Form 8839, Qualified Adoption Expenses, and its instructions for more details. 1040 easy General business tax credit. 1040 easy   The general business credit available to a taxpayer is limited. 1040 easy Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. 1040 easy Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. 1040 easy   After the carryforward period, a deduction may be allowed for any unused business credit. 1040 easy If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. 1040 easy   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. 1040 easy Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. 1040 easy Self-employment tax. 1040 easy   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. 1040 easy 28 or more. 1040 easy Alternative minimum tax (AMT). 1040 easy   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. 1040 easy The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. 1040 easy In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. 1040 easy Form 6251. 1040 easy    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. 1040 easy See the form instructions for information on when you must attach Form 6251 to Form 1040. 1040 easy Form 8801. 1040 easy   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. 1040 easy See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. 1040 easy Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. 1040 easy Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. 1040 easy Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. 1040 easy For this purpose, a qualified hazardous duty area is treated as a combat zone. 1040 easy If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. 1040 easy If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. 1040 easy Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. 1040 easy If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. 1040 easy Also, if any tax was collected after the date of death, that amount will be credited or refunded. 1040 easy The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. 1040 easy This is true even if death actually occurred earlier. 1040 easy For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. 1040 easy Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. 1040 easy S. 1040 easy employee, and In a military or terrorist action. 1040 easy The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. 1040 easy Example. 1040 easy The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. 1040 easy S. 1040 easy employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. 1040 easy Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. 1040 easy Military or terrorist action defined. 1040 easy   A military or terrorist action means the following. 1040 easy Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. 1040 easy Any military action involving the U. 1040 easy S. 1040 easy Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. 1040 easy   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. 1040 easy Military action does not include training exercises. 1040 easy Any multinational force in which the United States is participating is treated as an ally of the United States. 1040 easy Determining if a terrorist activity or military action has occurred. 1040 easy   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. 1040 easy Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. 1040 easy Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. 1040 easy The April 19, 1995, terrorist attack on the Alfred P. 1040 easy Murrah Federal Building (Oklahoma City). 1040 easy The September 11, 2001, terrorist attacks. 1040 easy The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. 1040 easy The Act also exempts from federal income tax the following types of income. 1040 easy Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. 1040 easy Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. 1040 easy Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. 1040 easy Payments from the September 11th Victim Compensation Fund 2001. 1040 easy The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. 1040 easy See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. 1040 easy Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. 1040 easy The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. 1040 easy For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. 1040 easy However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). 1040 easy For more information on the Act, see Publication 3920. 1040 easy Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. 1040 easy If any tax is still due, it will be canceled. 1040 easy The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. 1040 easy If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. 1040 easy Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. 1040 easy This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. 1040 easy Filing a claim. 1040 easy   Use the following procedures to file a claim. 1040 easy If a U. 1040 easy S. 1040 easy individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. 1040 easy Form W-2, Wage and Tax Statement, must accompany all returns. 1040 easy If a U. 1040 easy S. 1040 easy individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. 1040 easy You must file a separate Form 1040X for each year in question. 1040 easy   You must file these returns and claims at the following address for regular mail (U. 1040 easy S. 1040 easy Postal Service). 1040 easy    Internal Revenue Service 333 W. 1040 easy Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. 1040 easy On the applicable return, write the same phrase on the line for total tax. 1040 easy If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. 1040 easy   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. 1040 easy On joint returns, make an allocation of the tax as described below under Joint returns. 1040 easy If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. 1040 easy   You must attach Form 1310 to all returns and claims for refund. 1040 easy However, for exceptions to filing Form 1310, see Form 1310. 1040 easy Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. 1040 easy   You must also attach proof of death that includes a statement that the individual was a U. 1040 easy S. 1040 easy employee on the date of injury and on the date of death and died as the result of a military or terrorist action. 1040 easy For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. 1040 easy For other U. 1040 easy S. 1040 easy civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. 1040 easy For other U. 1040 easy S. 1040 easy civilian employees killed overseas, attach a certification from the Department of State. 1040 easy   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. 1040 easy Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. 1040 easy Joint returns. 1040 easy   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. 1040 easy Determine the decedent's tax liability as follows. 1040 easy Figure the income tax for which the decedent would have been liable if a separate return had been filed. 1040 easy Figure the income tax for which the spouse would have been liable if a separate return had been filed. 1040 easy Multiply the joint tax liability by a fraction. 1040 easy The numerator of the fraction is the amount in (1), above. 1040 easy The denominator of the fraction is the total of (1) and (2). 1040 easy   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. 1040 easy Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. 1040 easy Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 1040 easy If a personal representative has been appointed, the personal representative must sign the return. 1040 easy If it is a joint return, the surviving spouse must also sign it. 1040 easy If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. 1040 easy If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 1040 easy ” To claim a refund for the decedent, do the following. 1040 easy If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. 1040 easy If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. 1040 easy (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. 1040 easy ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). 1040 easy If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. 1040 easy Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. 1040 easy Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. 1040 easy Joint return by surviving spouse. 1040 easy   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. 1040 easy Decedent as your dependent. 1040 easy   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. 1040 easy   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. 1040 easy To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. 1040 easy To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. 1040 easy Qualifying widows and widowers. 1040 easy   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. 1040 easy Requirements. 1040 easy   Generally, you qualify for this special benefit if you meet all of the following requirements. 1040 easy You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. 1040 easy You did not remarry before the end of the current tax year. 1040 easy You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. 1040 easy You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. 1040 easy Example. 1040 easy William Burns' wife died in 2010. 1040 easy William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. 1040 easy For 2010, he was entitled to file a joint return for himself and his deceased wife. 1040 easy For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. 1040 easy For later years, he may qualify to file as a head of household. 1040 easy Figuring your tax. 1040 easy   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. 1040 easy Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. 1040 easy   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. 1040 easy Joint return filing rules. 1040 easy   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. 1040 easy See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. 1040 easy Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. 1040 easy If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. 1040 easy This exclusion does not apply to certain income. 1040 easy For more information, see Publication 3920. 1040 easy How To Report Income in respect of a decedent must be included in the income of one of the following. 1040 easy The decedent's estate, if the estate receives it. 1040 easy The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. 1040 easy Any person to whom the estate properly distributes the right to receive it. 1040 easy If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. 1040 easy See Estate Tax Deduction, later. 1040 easy Example 1. 1040 easy Frank Johnson owned and operated an apple orchard. 1040 easy He used the cash method of accounting. 1040 easy He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. 1040 easy The proceeds from the sale are income in respect of a decedent. 1040 easy When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. 1040 easy When Frank's widow collects the $2,000, she must include that amount in her return. 1040 easy It is not reported on the final return of the decedent or on the return of the estate. 1040 easy Example 2. 1040 easy Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. 1040 easy The amount accrued from the sale of the apples would be included on his final return. 1040 easy Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. 1040 easy Example 3. 1040 easy On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. 1040 easy His adjusted basis in the tractor was $2,000. 1040 easy George died on February 15, before receiving payment. 1040 easy The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. 1040 easy In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. 1040 easy Example 4. 1040 easy Cathy O'Neil was entitled to a large salary payment at the date of her death. 1040 easy The amount was to be paid in five annual installments. 1040 easy The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. 1040 easy The payments are income in respect of a decedent. 1040 easy None of the payments were includible on Cathy's final return. 1040 easy The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. 1040 easy Example 5. 1040 easy You inherited the right to receive renewal commissions on life insurance sold by your father before his death. 1040 easy You inherited the right from your mother, who acquired it by bequest from your father. 1040 easy Your mother died before she received all the commissions she had the right to receive, so you received the rest. 1040 easy The commissions are income in respect of a decedent. 1040 easy None of these commissions were includible in your father's final return. 1040 easy The commissions received by your mother were included in her income. 1040 easy The commissions you received are not includible in your mother's income, even on her final return. 1040 easy You must include them in your income. 1040 easy Character of income. 1040 easy   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. 1040 easy If the income would have been a capital gain to the decedent, it will be a capital gain to you. 1040 easy Transfer of right to income. 1040 easy   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. 1040 easy   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. 1040 easy   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. 1040 easy See Installment obligations, later. 1040 easy Transfer defined. 1040 easy   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. 1040 easy Installment obligations. 1040 easy   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. 1040 easy Include in your income the same profit the decedent would have included had death not occurred. 1040 easy For more information, see Publication 537, Installment Sales. 1040 easy   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. 1040 easy Transfer to obligor. 1040 easy   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). 1040 easy A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. 1040 easy An obligation that becomes unenforceable is treated as having been canceled. 1040 easy   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. 1040 easy The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. 1040 easy   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. 1040 easy Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. 1040 easy Wages. 1040 easy   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. 1040 easy The income is not reduced by any amounts withheld by the employer. 1040 easy If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. 1040 easy   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. 1040 easy However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. 1040 easy These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. 1040 easy These wages are not included in box 1 of Form W-2. 1040 easy   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe