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David M. Kaufmann, CPA
Voice: 720.493.4804
Email:
contact2@kaufmann-cpa.com
Physical Address:
2831 Wyecliff Way
Highlands Ranch, CO 80126
Mailing Address:
PO Box 632285
Highlands Ranch, CO 80163-2285
Email:
contact2@kaufmann-cpa.com
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Note: This is a complicated subject. We will only
touch on some topics. We recommend that you talk these issues over
with an attorney and a CPA.
What taxes
might be due after someone dies?
What asset
level justifies filing of an estate (death tax) tax return?
What
income level justifies filing of a final income tax return?
What income level justifies filing
of an estate income tax return?
When is the final income tax return
due for someone who has died?
When is
the estate income tax return due for someone who has died?
(Note: This discussion will only deal with federal taxes.
There could be state and local taxes required also.
For a discussion of
Colorado taxes after someone passes away, click on this link.
Reporting of foreign gifts or
inheritances.)
What taxes might be due after
someone dies?
Estate (death) taxes are frequently discussed in the
media. Very few estates have to pay estate taxes. This is a tax
on the value of the net assets owned at the date of death. This tax
can get as high as 40%. If this person has made substantial
gifts during his lifetime, the gifts can figure into the tax computation.
This tax is paid by the estate, not beneficiaries.
Individual or personal income tax. This tax would
be filed on the frequently discussed Form 1040. The estate should pay
this tax.
Estate income tax. Estate (death) taxes
and estate income taxes are two different types of tax! It is very
easy and normal to confuse estate tax with estate income tax. Estate
income tax is tax on the income after a person has died. Some examples
of income would be interest, dividends, gains from sales of stock or real
estate. This tax might be paid by the estate or beneficiaries.
Most estates have to pay or file a estate income tax return(s)
Top
What asset level justifies
filing of an estate (death tax) tax return?
For someone who dies in 2013, the
estate tax return is required if the gross estate is more than $5,000,000.
(Indexed for inflation after 2013.) Roughly speaking, the gross estate is the value of the state before any
reductions for liabilities, such as mortgages.
Life insurance proceeds would be
included in the gross estate if the life insurance policy was owned by the
person who died. This has nothing to do with who are the beneficiaries
of the life insurance.
Clearly, the typical gross estate is
less than $5,000,000.
This filing requirement amount may
be a different amount in different years.
Top
What income level
justifies filing of a final income tax return?
In general for 2011:
|
STATUS |
AGES |
FILE IF GROSS INCOME AT LEAST |
|
Single |
Under 65 |
$9,500 |
|
Single |
Over 65 |
10,950 |
|
Married |
Both under 65 |
19,000 |
|
Married |
One spouse over 65 |
20,150 |
|
Married |
Both over 65 |
21,300 |
Top
What income level justifies filing
of an estate income tax return?
In 2013, if the gross income is $600 or more, or, if a
beneficiary is a nonresident alien, an estate income tax return will need to be
filed. This return is also known as a fiduciary income tax return. Gross
income can be confusing. If an estate sells stock or real estate for $100,000
and the cost basis is $100,00, there is no gain or loss, but the gross income is
$100,000. In this example, an estate income tax return should be filed or
expected nasty correspondence from the IRS.
Top
When is the final income tax return
due for someone who has died?
Simple. The final individual or personal income tax is
due on the same day if the taxpayer had not died.
Thus, if someone dies on January 1, 2012, the final Form 1040
will be due on April 15th, 2013.
Top
When is the estate income tax return due for someone who has died?
We have run into quite a few people who get incorrect advice
on this!
Lets first answer the question, "When does the first tax year
end for an estate?" The latest that it can end is the latest end of the
month such that the tax year does not exceed a year. Example, if someone
dies on June 15, 2013, the latest end of the estate tax year would be May 31,
2014.
There are some complex reasons why one might want to end the
year sooner. Ending the year sooner might result in some tax savings.
The estate (fiduciary) income tax return is due on the 15th
day of the 4th month after the end of the year. If the year ends on
December 31, 2012, the due date is April 15, 2013. If the year ends on January 31,
2013,
the due date is May 15, 2013.
For more information, see our
Estate Income Tax Due Date page.
Form 1041, U.S. Income Tax Return for Estates and Trusts, is
the federal form for estate income taxes.
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The information contained here are simplifications of complex subjects. Talk to your CPA and
attorney if you want to pursue this subject more.
If you have questions about this, do not hesitate to contact us
at 720-493-4804. We serve clients all
over the country. A large portion of my business is preparing tax returns
and tax planning for trusts, estates and beneficiaries of trusts and estates.
US Estate Income Tax Return
US Estate Income Tax Return Instructions
Colorado Estate Income Tax Return
IRS Publication 559 |