Filing Income Tax Returns for a Decedent, Estate, or Trust

• Author: Margaret A. Munro, Kathryn A. Murphy
• Profession: Has more than 30 years' experience in trusts, estates, family tax, and small businesses/Attorney with more than 20 years' experience administering estates and trusts and preparing estate and gift tax returns
• Pages: 295-318

CHAPTER 18 Filing Income Tax Returns for a Decedent, Estate, or Trust 295

Chapter18

Filing Income Tax

Returns for a Decedent,

Estate, or Trust

For the most part, all income tax returns are alike. Of course, there are dier-

ences between preparing (and ling) your own Form 1040 and the decedent’s,

which you still must le in order to report income and deductions, up to and

including the date of death. And those dierences become even more pronounced

after you move into income taxation of estates and trusts, where some concepts

remain the same but others change.

In this chapter, you discover what’s similar and what’s dierent with both the

decedent’s nal Form 1040 and the trust or estate’s Form 1041. We tell you how

to stay in the clear with the IRS as you prepare the nal year (or maybe two) of the

decedent’s personal income tax returns (Form 1040), or you complete and le

income tax returns for estates and trusts (Form 1041).

IN THIS CHAPTER

»

Applying for a Taxpayer Identication

Number

»

Deciding when the decedent’s tax

year ends

»

Determining the decedent’s (and the

estate’s) income

»

Calculating deductions

»

Tackling Page 2 of Form 1041

296 PART 4 Paying the Taxes

Before You Begin: What You Need to Do

Thinking about income taxes may not be high on your list of priorities as you

begin administering an estate or trust, but it will soon become a main focus of

your administration, whether you’re thrilled by the idea or not. Planning for those

rst income tax returns should begin right away, not at year-end when the rst

deadline for ling is fast approaching.

The following sections help keep your tax reporting running as smoothly as pos-

sible. We explain how to obtain a federal tax ID number and how to choose an

appropriate tax year-end.

Obtain a federal tax ID number

Before you get started on any tax return, you need to know the federal Taxpayer

Identication Number (or TIN), which will be either an Employer Identication

Number (EIN) for estate and trust returns or the decedent’s Social Security num-

ber (SSN) for his or her nal Form 1040.

Finding the decedent’s SSN is easy; it’s scattered all over his or her nancial doc-

uments. The EIN, however, doesn’t exist until you apply for it. We advise applying

for one as soon as you know you’re (a) going to have to open an estate bank

account or investment account or (b) you’re going to have to le any sort of tax

return for the estate (either income or estate). Apply for the estate or trust’s TIN

by using Form SS-4, Application for Employer Identication Number, which you

can get by visiting any IRS oce, phoning 800-829-4933, or going to www.irs.gov

(just click on “I need to apply for an EIN” to go directly to the form). When apply-

ing by phone or online, you receive your number immediately; you’ll receive a

response to an application to the IRS service center for your state within four

business days. If you le a physical application by mail, it takes up to ten days to

receive the form from the IRS, and up to an additional four weeks to receive the

number itself.

Every taxpayer needs a TIN, and you’re not allowed to le any tax returns without

one that has been specically assigned to that person, trust or estate. You can’t

use the decedent’s SSN to le an estate return, nor can you use the estate’s EIN to

le a return for a trust that inherits the estate’s property. Still, obtaining a TIN

only costs you a little time and no money, so don’t feel like you’re being wasteful

because you’re not able to recycle ones that are no longer useful, like the dece-

dent’s SSN.Be careful, though, and only apply for a TIN once for each taxpayer.

Nothing is worse than trying to sort out the confusion with the IRS and your

banks, brokerages, and anyone else to whom you’ve given the information, when

an estate or trust has more than one EIN.