{Read in 4 Minutes} As a Trusts and Estates attorney, I frequently represent Executors and Administrators of Estates after they receive their Letters from the Surrogate’s Court. One of the first things that a newly appointed Executor or Administrator needs to investigate is the outstanding tax returns and/or tax liability of the deceased. This is different than other types of taxes that Estates (such as estate tax), or beneficiaries need to deal with (Is my Inheritance Taxable?) This deals solely with the final return(s) of the deceased and any outstanding tax liability they may have for prior years.
Let’s use a simple example to illustrate this concern. Let’s say that a New Yorker dies on March 1st of this year. They died before they filed their annual income tax return for the proceeding year, as most people have not by March 1st. Once the Executor or Administrator receives their appointment, one of their first orders of business should be to file this last return. It doesn’t matter if the deceased dies on March 1st or October 1st (or any other date really), the Executor or Administrator should immediately find out when the deceased filed their last return and make sure that all returns are up-to-date.
Sometimes this is even a concern for people who are incredibly diligent about filing their tax returns. Consider this example:
Let’s say I file my tax return at the end of February of every tax year. I’m very excited to do it. I have all my documents immediately go to my accountant and the returns are prepared. So, let’s say that I die on March 1st. In this example, I’ve already filed my income tax return for the preceding year, but my Executor or Administrator is going to need to file my final income tax return for January and February in the year of my death, that return would not be due until the following April.
So, how does a good and diligent Executor or Administrator do this? Well, really, there are a few things that they should do. First, the Executor/Administrator should get their hands on the most recently filed income tax return. This may be available among the deceased’s papers, but it’s often easier just to find the deceased’s accountant and ask them for a copy of the return. As always, the deceased had given the Executor/Administrator information in advance and the more information they give in advance, the easier it is. If the deceased was married and was filing a joint return with their surviving spouse, it is even easier. The Executor/Administrator can simply ask the surviving spouse for a copy of the return.
If the Executor/Administrator strikes out on these fronts, all is not lost. It is possible to request copies of prior income tax returns from the IRS or the New York State Department of Taxation and Finance. An Executor or an Administrator can contact them directly, or, if they’re using an accountant, it is even easier (and quicker) for a tax practitioner to obtain this information directly.
Therefore, this is one of the many things that an Executor or Administrator must tend to when completing their duties. Depending on how simple and organized the deceased made things, it might be simple, or it might be daunting. But one way or another, this is something that needs to be dealt with before making distribution and accounting to the beneficiaries of an Estate.
For more information on this topic, please contact me.