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Tax returns 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. Tax returns Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Tax returns 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. Tax returns In general, an executor and an administrator perform the same duties and have the same responsibilities. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns The personal representative also must perform the following duties. Tax returns Apply for an employer identification number (EIN) for the estate. Tax returns File all tax returns, including income, estate and gift tax returns, when due. Tax returns Pay the tax determined up to the date of discharge from duties. Tax returns Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Tax returns 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. Tax returns Penalty. Tax returns There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Tax returns Reliance on an agent (attorney, accountant, etc. Tax returns ) is not reasonable cause for late filing. Tax returns It is the personal representative's duty to file the returns for the decedent and the estate when due. Tax returns Identification number. Tax returns The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Tax returns 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. Tax returns You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Tax returns You can get an EIN by applying online at www. Tax returns irs. Tax returns gov (click on "Apply for an EIN Online" under the Tools heading). Tax returns Generally, if you apply online, you will receive your EIN immediately upon completing the application. Tax returns You can also apply using Form SS-4, Application for Employer Identification Number. Tax returns Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Tax returns See the form instructions for other ways to apply. Tax returns Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Tax returns After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Tax returns As the personal representative handling the estate, you must furnish this identification number to the payer. Tax returns 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. Tax returns 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. Tax returns 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). Tax returns 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. Tax returns Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Tax returns Also do not use it to make estimated tax payments for a tax year after the year of death. Tax returns Penalty. Tax returns 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. Tax returns 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. Tax returns Notice of fiduciary relationship. Tax returns The term fiduciary means any person acting for another person. Tax returns It applies to persons who have positions of trust on behalf of others. Tax returns A personal representative for a decedent's estate is a fiduciary. Tax returns Form 56. Tax returns If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Tax returns Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Tax returns See the Instructions for Form 56 for filing requirements and other information. Tax returns File Form 56 as soon as all the necessary information (including the EIN) is available. Tax returns It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Tax returns The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Tax returns Termination of fiduciary relationship. Tax returns 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. Tax returns See Form 56 and its instructions for more information. Tax returns 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. Tax returns See below for a discussion of these forms. Tax returns Request for prompt assessment (charge) of tax. Tax returns 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. Tax returns However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Tax returns This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Tax returns This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Tax returns This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Tax returns Form 4810. Tax returns Form 4810 can be used for making this request. Tax returns It must be filed separately from any other document. Tax returns As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Tax returns 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. Tax returns This applies even though the returns were filed before the decedent's death. Tax returns Failure to report income. Tax returns 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. Tax returns However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Tax returns Request for discharge from personal liability for tax. Tax returns An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Tax returns The request must be made after the returns for those taxes are filed. Tax returns To make the request, file Form 5495. Tax returns For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Tax returns Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Tax returns If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Tax returns 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. Tax returns 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. Tax returns Insolvent estate. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Tax returns See Joint Return, later. Tax returns Return for preceding year. Tax returns 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. Tax returns The return for that year will be a regular return and the personal representative must file it. Tax returns Example. Tax returns Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Tax returns Her personal representative must file her 2012 return by April 15, 2013. Tax returns Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Tax returns Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Tax returns If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Tax returns 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. Tax returns Third party designee. Tax returns 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. Tax returns 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. Tax returns It also allows the designee to perform certain actions. Tax returns See the Instructions for Form 1040 for details. Tax returns Signature. Tax returns If a personal representative has been appointed, that person must sign the return. Tax returns If it is a joint return, the surviving spouse must also sign it. Tax returns 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. Tax returns ” 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. Tax returns ” Paid preparer. Tax returns 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. Tax returns See the Form 1040 instructions for details. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns The tax return must be prepared for the year of death regardless of when during the year death occurred. Tax returns Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Tax returns A tax return for a decedent can be electronically filed. Tax returns A personal representative may also obtain an income tax filing extension on behalf of a decedent. Tax returns Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Tax returns 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. Tax returns It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Tax returns In general, filing status depends on whether the decedent was considered single or married at the time of death. Tax returns See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Tax returns 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. Tax returns Also, the decedent may be entitled to other credits that result in a refund. Tax returns These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Tax returns Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Tax returns 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. Tax returns If the personal representative is filing a claim for refund on Form 1040X, Amended U. Tax returns S. Tax returns 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. Tax returns Example. Tax returns Edward Green died before filing his tax return. Tax returns You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns A new check will be issued in your name and mailed to you. Tax returns Death certificate. Tax returns When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Tax returns Instead, keep it for your records and provide it if requested. Tax returns Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Tax returns S. Tax returns Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Tax returns See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Tax returns Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns The filing status of the decedent in this instance is married filing a separate return. Tax returns For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Tax returns Personal representative may revoke joint return election. Tax returns A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Tax returns This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Tax returns 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. Tax returns Relief from joint liability. Tax returns 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. Tax returns 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. Tax returns For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Tax returns 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. Tax returns The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Tax returns This section explains how some types of income are reported on the final return. Tax returns For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Tax returns 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. Tax returns Constructive receipt of income. Tax returns 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. Tax returns Include the interest income on the final return. Tax returns Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Tax returns If the corporation customarily mailed its dividend checks, the dividend was includible when received. Tax returns 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. Tax returns Do not include the dividend in the final return. Tax returns Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Tax returns If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Tax returns 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. Tax returns 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. Tax returns You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Tax returns 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). Tax returns 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. Tax returns 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. Tax returns See U. Tax returns S. Tax returns 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. Tax returns How to report. Tax returns 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. Tax returns 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. Tax returns Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Tax returns Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Tax returns Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Tax returns Note. Tax returns 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. Tax returns See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Tax returns Partnership Income The death of a partner closes the partnership's tax year for that partner. Tax returns Generally, it does not close the partnership's tax year for the remaining partners. Tax returns 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. Tax returns 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. Tax returns On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Tax returns The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Tax returns The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Tax returns Example. Tax returns Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Tax returns The partnership uses a tax year ending June 30. Tax returns Mary died August 31, 2013, and her estate established its tax year through August 31. Tax returns The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Tax returns 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). Tax returns 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. Tax returns 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. Tax returns The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Tax returns The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Tax returns Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Tax returns 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. Tax returns For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Tax returns 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. Tax returns For more information, see Publication 555, Community Property. Tax returns 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. Tax returns 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. Tax returns The estate tax deduction, discussed later, does not apply to this amount. Tax returns If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Tax returns For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Tax returns 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. Tax returns The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Tax returns 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. Tax returns The estate tax deduction, discussed later, does not apply to this amount. Tax returns If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Tax returns 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. Tax returns 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. Tax returns For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Tax returns Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Tax returns These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Tax returns 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. Tax returns For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Tax returns Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Tax returns Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Tax returns This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Tax returns See Medical Expenses, later. Tax returns Exemptions You can claim the decedent's personal exemption on the final income tax return. Tax returns 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. Tax returns 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. Tax returns For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Tax returns 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. Tax returns This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Tax returns 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. Tax returns In that case medical expenses exceeding 7. Tax returns 5% of AGI may be deducted. Tax returns Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Tax returns Election for decedent's expenses. Tax returns Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Tax returns 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. Tax returns 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). Tax returns You can deduct expenses incurred in the year of death on the final income tax return. Tax returns 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. Tax returns The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Tax returns 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Tax returns Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Tax returns Making the election. Tax returns You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Tax returns 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. Tax returns This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Tax returns Example. Tax returns Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Tax returns Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Tax returns Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Tax returns Richard itemized his deductions when he filed his 2012 income tax return. Tax returns The personal representative of the estate paid the entire $800 liability in August 2013. Tax returns The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Tax returns 5% limit. Tax returns The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Tax returns 5% limit. Tax returns 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. Tax returns Medical expenses not paid by estate. Tax returns 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. Tax returns 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. Tax returns Insurance reimbursements. Tax returns 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. Tax returns The reimbursements are also includible in the decedent's gross estate. Tax returns No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Tax returns These expenses may be deductible for estate tax purposes on Form 706. Tax returns 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. Tax returns A net operating loss on the decedent's final income tax return can be carried back to prior years. Tax returns (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Tax returns ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Tax returns At-risk loss limits. Tax returns Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Tax returns These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns For more information, see Publication 925, Passive Activity and At-Risk Rules. Tax returns Passive activity rules. Tax returns A passive activity is any trade or business activity in which the taxpayer does not materially participate. Tax returns To determine material participation, see Publication 925. Tax returns Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Tax returns Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Tax returns Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Tax returns 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. Tax returns 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. Tax returns The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Tax returns Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Tax returns For more information, see Publication 925. Tax returns 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. Tax returns Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Tax returns Some of these credits are discussed next. Tax returns Earned income credit. Tax returns 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. Tax returns If the allowable credit is more than the tax liability for the year, the excess is refunded. Tax returns For more information, see Publication 596, Earned Income Credit (EIC). Tax returns Credit for the elderly or the disabled. Tax returns 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. Tax returns The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Tax returns For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Tax returns Child tax credit. Tax returns 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. Tax returns 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. Tax returns For more information, see the Instructions for Form 1040. Tax returns Adoption credit. Tax returns 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. Tax returns 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. Tax returns See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Tax returns General business tax credit. Tax returns The general business credit available to a taxpayer is limited. Tax returns 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. Tax returns Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Tax returns After the carryforward period, a deduction may be allowed for any unused business credit. Tax returns If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Tax returns For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Tax returns 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. Tax returns Self-employment tax. Tax returns 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. Tax returns 28 or more. Tax returns Alternative minimum tax (AMT). Tax returns The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Tax returns The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Tax returns In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Tax returns Form 6251. Tax returns Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Tax returns See the form instructions for information on when you must attach Form 6251 to Form 1040. Tax returns Form 8801. Tax returns If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Tax returns See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns For this purpose, a qualified hazardous duty area is treated as a combat zone. Tax returns If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Tax returns If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Tax returns 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. Tax returns If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Tax returns Also, if any tax was collected after the date of death, that amount will be credited or refunded. Tax returns 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. Tax returns This is true even if death actually occurred earlier. Tax returns For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Tax returns 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. Tax returns S. Tax returns employee, and In a military or terrorist action. Tax returns 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. Tax returns Example. Tax returns The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Tax returns S. Tax returns 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. Tax returns Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Tax returns Military or terrorist action defined. Tax returns A military or terrorist action means the following. Tax returns Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Tax returns Any military action involving the U. Tax returns S. Tax returns 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. Tax returns Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Tax returns Military action does not include training exercises. Tax returns Any multinational force in which the United States is participating is treated as an ally of the United States. Tax returns Determining if a terrorist activity or military action has occurred. Tax returns You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Tax returns 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. Tax returns Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Tax returns The April 19, 1995, terrorist attack on the Alfred P. Tax returns Murrah Federal Building (Oklahoma City). Tax returns The September 11, 2001, terrorist attacks. Tax returns The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Tax returns The Act also exempts from federal income tax the following types of income. Tax returns Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Tax returns Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Tax returns Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Tax returns Payments from the September 11th Victim Compensation Fund 2001. Tax returns The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Tax returns See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Tax returns 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. Tax returns The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Tax returns For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Tax returns 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). Tax returns For more information on the Act, see Publication 3920. Tax returns 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. Tax returns If any tax is still due, it will be canceled. Tax returns 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. Tax returns 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. Tax returns Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Tax returns 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. Tax returns Filing a claim. Tax returns Use the following procedures to file a claim. Tax returns If a U. Tax returns S. Tax returns 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. Tax returns Form W-2, Wage and Tax Statement, must accompany all returns. Tax returns If a U. Tax returns S. Tax returns individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Tax returns You must file a separate Form 1040X for each year in question. Tax returns You must file these returns and claims at the following address for regular mail (U. Tax returns S. Tax returns Postal Service). Tax returns Internal Revenue Service 333 W. Tax returns 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. Tax returns On the applicable return, write the same phrase on the line for total tax. Tax returns 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. Tax returns Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Tax returns On joint returns, make an allocation of the tax as described below under Joint returns. Tax returns 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. Tax returns You must attach Form 1310 to all returns and claims for refund. Tax returns However, for exceptions to filing Form 1310, see Form 1310. Tax returns Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Tax returns You must also attach proof of death that includes a statement that the individual was a U. Tax returns S. Tax returns employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Tax returns For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Tax returns For other U. Tax returns S. Tax returns civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Tax returns For other U. Tax returns S. Tax returns civilian employees killed overseas, attach a certification from the Department of State. Tax returns 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. Tax returns 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. Tax returns Joint returns. Tax returns If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Tax returns Determine the decedent's tax liability as follows. Tax returns Figure the income tax for which the decedent would have been liable if a separate return had been filed. Tax returns Figure the income tax for which the spouse would have been liable if a separate return had been filed. Tax returns Multiply the joint tax liability by a fraction. Tax returns The numerator of the fraction is the amount in (1), above. Tax returns The denominator of the fraction is the total of (1) and (2). Tax returns The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Tax returns Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Tax returns Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Tax returns If a personal representative has been appointed, the personal representative must sign the return. Tax returns If it is a joint return, the surviving spouse must also sign it. Tax returns 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. Tax returns 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. Tax returns ” To claim a refund for the decedent, do the following. Tax returns If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Tax returns 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. Tax returns (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Tax returns ) 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). Tax returns 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. Tax returns 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. Tax returns Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Tax returns Joint return by surviving spouse. Tax returns 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. Tax returns Decedent as your dependent. Tax returns 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. Tax returns If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Tax returns 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. Tax returns 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. Tax returns Qualifying widows and widowers. Tax returns 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. Tax returns Requirements. Tax returns Generally, you qualify for this special benefit if you meet all of the following requirements. Tax returns You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Tax returns You did not remarry before the end of the current tax year. Tax returns You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Tax returns 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. Tax returns Example. Tax returns William Burns' wife died in 2010. Tax returns William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Tax returns For 2010, he was entitled to file a joint return for himself and his deceased wife. Tax returns For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Tax returns For later years, he may qualify to file as a head of household. Tax returns Figuring your tax. Tax returns Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Tax returns Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Tax returns The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Tax returns Joint return filing rules. Tax returns 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. Tax returns See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Tax returns 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. Tax returns 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. Tax returns This exclusion does not apply to certain income. Tax returns For more information, see Publication 3920. Tax returns How To Report Income in respect of a decedent must be included in the income of one of the following. Tax returns The decedent's estate, if the estate receives it. Tax returns The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Tax returns Any person to whom the estate properly distributes the right to receive it. Tax returns 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. Tax returns See Estate Tax Deduction, later. Tax returns Example 1. Tax returns Frank Johnson owned and operated an apple orchard. Tax returns He used the cash method of accounting. Tax returns He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Tax returns The proceeds from the sale are income in respect of a decedent. Tax returns When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Tax returns When Frank's widow collects the $2,000, she must include that amount in her return. Tax returns It is not reported on the final return of the decedent or on the return of the estate. Tax returns Example 2. Tax returns Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Tax returns The amount accrued from the sale of the apples would be included on his final return. Tax returns Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Tax returns Example 3. Tax returns On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Tax returns His adjusted basis in the tractor was $2,000. Tax returns George died on February 15, before receiving payment. Tax returns 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. Tax returns In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Tax returns Example 4. Tax returns Cathy O'Neil was entitled to a large salary payment at the date of her death. Tax returns The amount was to be paid in five annual installments. Tax returns The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Tax returns The payments are income in respect of a decedent. Tax returns None of the payments were includible on Cathy's final return. Tax returns 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. Tax returns Example 5. Tax returns You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Tax returns You inherited the right from your mother, who acquired it by bequest from your father. Tax returns Your mother died before she received all the commissions she had the right to receive, so you received the rest. Tax returns The commissions are income in respect of a decedent. Tax returns None of these commissions were includible in your father's final return. Tax returns The commissions received by your mother were included in her income. Tax returns The commissions you received are not includible in your mother's income, even on her final return. Tax returns You must include them in your income. Tax returns Character of income. Tax returns 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. Tax returns If the income would have been a capital gain to the decedent, it will be a capital gain to you. Tax returns Transfer of right to income. Tax returns 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. Tax returns 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. Tax returns 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. Tax returns See Installment obligations, later. Tax returns Transfer defined. Tax returns 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. Tax returns Installment obligations. Tax returns 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. Tax returns Include in your income the same profit the decedent would have included had death not occurred. Tax returns For more information, see Publication 537, Installment Sales. Tax returns 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. Tax returns Transfer to obligor. Tax returns 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). Tax returns A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Tax returns An obligation that becomes unenforceable is treated as having been canceled. Tax returns 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. Tax returns 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. Tax returns If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Tax returns 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. Tax returns Wages. Tax returns 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. Tax returns The income is not reduced by any amounts withheld by the employer. Tax returns 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. Tax returns Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Tax returns However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Tax returns These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Tax returns These wages are not included in box 1 of Form W-2. Tax returns Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe
Indian Tribal Gov'ts Topics
Tax Information for Indian Tribal Governments
Per capita payments from trust funds held by the Department of the Interior
The Department of the Treasury and IRS issued interim guidance regarding per capita distributions made to members of Indian tribes from funds held in trust by the Secretary of the Interior.
Voluntary Withholding on Dividends and Other Distributions by Alaska Native Corporations
Shareholders who receive dividends or other distributions from an Alaska Native Corporation (ANC) can now request voluntary withholding.
Indian fishing rights-related activities income eligible for qualified retirement plan contributions
Amendments to the Treasury Regulations clarify that Indian tribal members who earn compensation for services performed in a fishing rights-related activity can contribute those amounts to a qualified retirement plan.
ITG Voluntary Closing Agreement Process
Information for Indian Tribes that are interested in an effective way of correcting a past error, mistake or misinterpretation of tax law or filing requirement.
Treasury and the IRS Release Tribal General Welfare Guidance
The Department of the Treasury announced key economic development initiatives that address the unique set of challenges faced by the Native American community.
Per Capita Payments from Certain Tribal Trust Settlement Proceeds Excluded from Income
Updated information regarding per capita payments from Tribal trust settlements
Reallocation Process Announced for Tribal Economic Development Bonds
The IRS has announced a process for reallocation of available amounts of volume cap for Tribal Economic Development Bonds.
Information into the intent of Title 31 (anti-money laundering), non-Title 31 and other casino issues.
Indian Health Care Benefits and Section 139D
Frequently asked questions concerning Indian Health Care Benefits and Section 139D.
Newsworthy items which may affect Indian tribal governments.
News information of interest to Indian tribal governments.
IRS Requests Consultation on General Welfare and Issues Important New Guidance that will affect Indian Tribal Governments
The IRS has issued several important items of guidance that affect Indian Tribal Governments. Items include a Retirement Plan phone forum, reallocation of Tribal Economic Development Bonds, the Pension Protection Act and governmental plans, IGRA trust guidance, and a request for consultation on the general welfare doctrine.
ACT Public Meeting, Agenda, New Member
One new member joined ITG project team; report on recommendations to be released in June.
Voluntary Classification Settlement Program
Employers may reclassify workers as employees for future periods with partial employment tax relief.
Indian Tribal Governments Webinars and Phone Forums
Educational recordings covering topics for Indian Tribal governments
ITG Published Guidance
Links to guidance published by the Service regarding federal tax administration as it relates to tribal governments.
New Annual Electronic Filing Requirement for Small Tax-Exempt Organizations
Beginning in 2008, small tax-exempt organizations that previously were not required to file returns risk losing their tax-exempt status if they do not file an annual electronic notice (e-Postcard Form 990-N). This will include small tax-exempt organizations operated by, or on behalf of Indian tribal governments.
Tax Status of Tribes
Different ways tribal entities can be structured and the tax implications of each; what constitutes a federally recognized tribe and the benefits of such; and the taxability of certain types of income to tribal members.
Information regarding tribal governments federal tax obligations and responsibilities regarding income from natural resources, IRC Section 7873, etc.
Information regarding excise taxes, who is liable, and definitions.
Tax Information for Charities and Other Non-Profits - ITG
Information for Tribal governments as well as other organizations on charitable organizations and deductions.
Tax Exempt Bonds
Insights into tribal governments' economic benefits of issuing tax exempt bonds; their ability to issue tax exempt bonds; what requirements must be met; and other applicable general rules.
FAQs for Indian Tribal Governments regarding Targeted Tax Benefits
Insights into the employment tax credits (Indian Employment, Work Opportunity, Welfare-to-Work, and Empowerment Zone Employment) available to those doing business with or employing Native Americans, and special depreciation rules for qualified property used on reservations.
Links to Helpful Resources
A repository of resources for specific research and/or general knowledge.
IRS’ Electronic Filing and E-Services
The IRS continues to expand its electronic filing and e-Services to allow tax professionals and payers to do business with the IRS electronically.
The Internal Revenue Service's Office of Privacy ensures your personal information is protected whenever you visit the IRS website.
Want to visit us again? Just remember www.irs.gov/tribes. It's that easy!
Instructions for ITG customers when they experience an interruption in tax preparation for whatever reason.
ITG 2011 Customer Satisfaction Survey
ITG 2011 Customer Satisfaction Survey
Treasury Department Tribal Consultation and Coordination
The Treasury Department now has a web page for Tribal Consultation.
ITG Employment Taxes
Information for Indian Tribal Governments with regard to the withholding, filing, and paying of employment taxes.
Frequently Asked Questions and Answers for Indian Tribal Governments
General information about subjects of interest to tribal governments.
Information regarding the taxability of tip income, employee and employer reporting responsibilities, and the Tip Rate Determination Agreement (TRDA) program.
Information into what types of forms need to be filed based on the types of income being reported, and the rules on backup withholding - when it's applicable and how it's reported.
Fraud and Abusive Schemes Information for Indian Tribal Governments
Information on abusive schemes for Indian Tribal Governments.
Voluntary Classification Settlement Program (VCSP)
This page describes the new Voluntary Classification Settlement Program for employers.
Page Last Reviewed or Updated: 28-Mar-2014
The Tax Returns
Tax returns Part Six - Cómo Calcular los Impuestos y Créditos Los ocho capítulos de esta sección explican cómo calcular sus impuestos y cómo calcular los impuestos de determinados hijos con ingresos no derivados del trabajo de $2,000 o más. Tax returns Explican también créditos tributarios que, a diferencia de las deducciones, se restan directamente de los impuestos y los disminuyen, dólar por dólar. Tax returns El capítulo 36 trata sobre el crédito por ingreso del trabajo y el capítulo 37 abarca una amplia gama de otros créditos, como por ejemplo, el crédito por adopción. Tax returns Table of Contents 30. Tax returns Cómo Calcular los ImpuestosIntroduction Cómo Calcular los Impuestos Impuesto Mínimo Alternativo (AMT) Impuestos Calculados por el IRS Cómo Presentar la Declaración 31. Tax returns Impuesto sobre Ingresos No Derivados del Trabajo de Determinados Hijos¿Que Hay de Nuevo? Introduction Useful Items - You may want to see: Cómo Saber si se Tiene que Utilizar la Declaración del Padre o de la MadrePadres que no Presentan la Declaración Conjunta Elección de los Padres de Declarar los Intereses y Dividendos del HijoConsecuencias de Incluir los Ingresos del Hijo Cómo Calcular los Ingresos del Hijo Cómo Calcular el Impuesto Adicional Impuesto para Determinados Hijos con Ingresos No Derivados del TrabajoCómo Facilitar Información sobre los Padres (líneas A-C del Formulario 8615) Paso 1. Tax returns Cómo Calcular los Ingresos Netos No Derivados del Trabajo del Hijo (Parte I del Formulario 8615) Paso 2. Tax returns Cómo Calcular el Impuesto Provisional a la Tasa Impositiva de los Padres (Parte II del Formulario 8615) Paso 3. Tax returns Cómo Calcular el Impuesto del Hijo (Parte III del Formulario 8615) 32. Tax returns Crédito por Gastos del Cuidado de Menores y DependientesRecordatorios Introduction Useful Items - You may want to see: Requisitos Para Reclamar el CréditoRequisitos de la Persona Calificada Requisito del Ingreso del Trabajo Requisito de Gastos Relacionados con el Trabajo Requisito de la Declaración Conjunta Requisito de Identificación del Proveedor de Cuidados Cómo Calcular el CréditoCómo Calcular el Total de los Gastos Relacionados con el Trabajo Límite del Ingreso del Trabajo Límite de Dinero Cantidad de Crédito Cómo Reclamar el CréditoCrédito tributario no reembolsable. Tax returns Impuestos sobre la Nómina para Empleadores de Empleados Domésticos 33. Tax returns Crédito para Ancianos o Personas IncapacitadasIntroduction Useful Items - You may want to see: ¿Reúne los Requisitos del Crédito?Persona que Reúne los Requisitos Límites sobre los Ingresos Cómo Reclamar el CréditoEl Crédito Calculado por el IRS El Crédito Calculado por Usted Mismo 34. Tax returns Crédito Tributario por HijosIntroduction Useful Items - You may want to see: Hijo Calificado Cantidad de CréditoLímites del Crédito Cómo Reclamar el Crédito Crédito Tributario Adicional por Hijos Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040)Parte I Partes II a IV 35. Tax returns Créditos Tributarios por EstudiosIntroduction Useful Items - You may want to see: ¿Quién Puede Reclamar un Crédito Tributario por Estudios? Gastos de Estudios CalificadosNo se Permite Beneficio Doble Ajustes a los Gastos de Estudios Calificados 36. Tax returns Crédito por Ingreso del Trabajo (EIC) Qué Hay de Nuevo Recordatorios Introduction Useful Items - You may want to see: ¿Reúne los Requisitos para el Crédito?Si se Hizo una Solicitud Indebida del Crédito en un Año Anterior Parte A. Tax returns Requisitos para TodosRequisito 1. Tax returns Tiene que Tener Ingresos Brutos Ajustados Inferiores a: Requisito 2. Tax returns Tiene que tener un número de Seguro Social válido Requisito 3. Tax returns Su Estado Civil para Efectos de la Declaración no Puede Ser Casado que Presenta la Declaración por Separado Requisito 4. Tax returns Tiene que Ser Ciudadano o Extranjero Residente de los Estados Unidos Durante Todo el Año Requisito 5. Tax returns No Puede Presentar el Formulario 2555 ni el Formulario 2555-EZ Requisito 6. Tax returns Tiene que Tener Ingresos de Inversiones de $3,300 o Menos Requisito 7. Tax returns Tiene que Haber Recibido Ingresos del Trabajo Parte B. Tax returns Requisitos si Tiene un Hijo CalificadoRequisito 8. Tax returns Su Hijo Tiene que Cumplir los Requisitos de Parentesco, Edad, Residencia y de la Declaración Conjunta Requisito 9. Tax returns Para Reclamar el Crédito por Ingreso del Trabajo, Sólo una Persona Puede Basarse en el Hijo Calificado de Usted Requisito 10. Tax returns Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Parte C. Tax returns Requisitos si no Tiene un Hijo CalificadoRequisito 11. Tax returns Tiene que Tener por lo Menos 25 Años pero Menos de 65 Años Requisito 12. Tax returns No Puede Ser el Dependiente de Otra Persona Requisito 13. Tax returns Otro Contribuyente no Puede Reclamarlo a Usted como Hijo Calificado Requisito 14. Tax returns Tiene que Haber Vivido en los Estados Unidos durante más de la Mitad del Año Parte D. Tax returns Cómo Calcular y Reclamar el Crédito por Ingreso del TrabajoRequisito 15. Tax returns Su Ingreso del Trabajo Tiene que Ser Menos de: El IRS Puede Calcularle el Crédito por Ingreso del Trabajo Cómo Calcular Usted Mismo el Crédito por Ingreso del Trabajo EjemplosEjemplo 1. Tax returns Juan y Julia Martínez (Formulario 1040A) Ejemplo 2. Tax returns Carla Robles (Formulario 1040EZ) 37. Tax returns Otros CréditosQué Hay de Nuevo Introduction Useful Items - You may want to see: Créditos no ReembolsablesCrédito por Adopción Crédito por Vehículo Motorizado Alternativo Crédito por Bienes de Reabastecimiento de Vehículos con Combustible Alternativo Crédito para Titulares de Bonos de Crédito Tributario Crédito por Impuestos Extranjeros Crédito por Intereses Hipotecarios Crédito no Reembolsable del Impuesto Mínimo de Años Anteriores Crédito por Vehículos Enchufables con Motor de Dirección Eléctrica Créditos por Energía de la Propiedad Residencial Crédito por Aportaciones a Cuentas de Ahorro para la Jubilación (Crédito del Ahorrador) Créditos ReembolsablesCrédito por el Impuesto sobre Ganancias de Capital no Distribuidas Crédito Tributario por Cobertura del Seguro Médico Crédito por Retención en Exceso del Impuesto del Seguro Social o del Impuesto de la Jubilación Ferroviaria Prev Up Next Home More Online Publications