All That's Guaranteed: Death and Taxes
Sadly, the IRS Cannot Be Escaped, Even if You Die.
Survival Guide: Taxes After Death
As we all know the two things that can’t be avoided are death and taxes - yes you still have to do dad’s taxes even if he is not around anymore. The government needs their cut because roads don’t pave themselves.
Dealing with taxes after someone dies can feel overwhelming, but like everything else in estate administration, it becomes more manageable when you know what needs to happen and when, and who is responsible for what.
This handy guide breaks down what happens, who’s responsible, and what you’ll need.
Taxes After Death: All You Need to Know
Filing Taxes for the Deceased
Who Handles Taxes After Death?
The executor (if there’s a will) or the administrator (if there isn’t one) is responsible for filing final tax returns - “Final Return for Decedent”.
They may need to work with an accountant, attorney, or the IRS to make sure everything is accurate and follows the correct process.
Obtaining Their Final W2
Easiest Path
Check with an employer or payroll provider. They will likely ask you to provide copies of the death certificate and your court-issued Letters Testamentary.
Alternative Paths
The IRS can provide a Wage and Income Transcript. Use Form 4506-T to request this transcript, which shows W-2 data reported by the employer. You must attach proof of authority (death certificate + executor documentation).
If the person was self employed you won’t request a W-2. Instead, you gather 1099s, business income/expense records, and file Schedule C with the final tax return.
Final Individual Income Tax Return (Form 1040)
What it covers: The deceased person’s final individual income tax return (Form 1040) covers the period from Jan 1 until the date of death.
Deadline: This is due by April 15 of the following year, just like any other tax return.
Who files:
The executor files it just like a normal tax return, marking it “Deceased” at the top and signing as the personal representative.
If the deceased was married, the surviving spouse can often file jointly for that year.
Note: Do not wait for probate to finish. This return must be filed on time regardless of how long the probate process takes.
Why it matters: This closes out the decedent’s personal tax obligations.
Estate Income Tax Return (Form 1041)
What it covers: Income the estate itself earns after death while assets are tied up in probate. Examples:
Bank account interest that accrues in the estate’s name
Rental income from property still owned by the estate
Dividends from stocks held until distributed
Who files: The executor, on behalf of the estate (the estate becomes its own taxpayer with its own EIN).
When it’s required: If the estate earns $600+ of gross income in a year.
Deadline: April 15.
Why it matters: Even though the person is gone, their assets may keep producing income while in probate. That income must be reported separately from the final 1040.
Note:This process is not a one and done like individual tax returns. Estate Income Tax Return (Form 1041) generally must be filed every year the estate remains open and earns income. Once you open probate, the estate is treated as its own taxpayer with its own EIN (Employer Identification Number). The estate must file annually for each year it earns income, until probate is closed and assets are distributed.
For Example: If probate takes 3 years and the estate earns interest or rent each year → three separate 1041s will be required (one per year).
Federal Estate Tax Return (Form 706)
Estate Taxes are taxes on the transfer of the estate itself. These apply only if the estate is very large (in 2024, over $13.61 million federally). Most families won’t owe federal estate tax.
What it is: A tax on the estate itself before assets are distributed to heirs.
Who pays: The estate (not the heirs).
What it covers: The total value of the estate (all assets owned at death). This is about wealth transfer, not income.
Who files: The executor.
When it’s required: Only if the estate exceeds the federal estate tax exemption ($13.61M in 2024, indexed annually). State thresholds can be much lower so check in on your local tax codes.
Deadline: 9 months after death (extensions possible).
Why it matters: Every person has a federal estate tax exemption. As of 2024 it’s $13.61 million. That means when you die, up to $13.61M of your estate can pass tax-free. Only amounts above that are taxed.
For Example: If someone dies with $20M, the estate may owe federal estate tax on ~$6.39M (the portion above $13.61M). The heirs get what’s left after taxes are paid.
Interesting Fact
If you personally inherit two estates in the same year, you’re not adding them together to calculate a tax liability. Each estate is evaluated on its own against the federal exemption.
Estate A: $13M < $13.61M → no federal estate tax.
Estate B: $13M < $13.61M → no federal estate tax.
So be nice to your rich uncle. 🤷♀️
Estate Income Tax vs. Estate Taxes vs. Income Taxes
Wait, this is a lot of taxes?! How are they all different? Here is the quick run down:
Form 1040 (Final Tax Return 1040) → Personal taxes up until death.
Form 1041 (Estate Income Tax) → Taxes on new income the estate generates during probate.
Form 706 (Estate Tax) → A tax on wealth transfer, only for estates above the exemption threshold.
Key Takeaway
As executor, you may need to file one, two, or all three depending on the situation, so remember:
Always: Final 1040.
Often: 1041, if the estate keeps earning money.
Rarely: 706, only if the estate is very large.
Contact a tax attorney or accountant if you have more specific questions about how to avoid estate taxes. (We aren’t tax avoidant just want you to know your options)
Inheritance Taxes
What it is: A tax on the person receiving the inheritance based on what they inherit.
Who pays: The heir/beneficiary, not the estate.
Where it applies: Only 6 U.S. states levy inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Rates: Often depend on the relationship to the deceased (spouses usually exempt, children often lower rates, distant relatives/higher rates).
Common Deductions and Considerations
Medical expenses paid within one year of death may be deductible.
Funeral expenses are not deductible on individual tax returns, but may be deductible on an estate tax return.
Outstanding debts and administrative costs can sometimes reduce taxable estate value.
Deadlines & Documentation
Keep copies of the death certificate, will, and letters testamentary.
Notify the IRS and state tax authority of the death as soon as you are appointed administrator or executor.
File IRS Form 56 (Notice Concerning Fiduciary Relationship) to tell the IRS you’re the estate’s representative and give the date of death.
File final 1040 (and possibly 1041) on time (April 15).
Pay any taxes due from estate funds, not from heirs’ pockets (unless funds are insufficient).
Getting Help
Taxes after death can get complicated quickly. Executors should consult:
A CPA or tax preparer familiar with estate issues
An estate attorney for larger or multi-state estates
IRS Publication 559: “Survivors, Executors, and Administrators” (free resource)
Key Takeaway
Death and taxes don’t have to be terrifying. Most estates only need a final income tax return, with estate or inheritance taxes applying in a smaller number of cases. With the right documents, timelines, and help (sometimes from a professional), you can close this chapter with confidence.
Important Note
We at Good Grief are not lawyers / accountants, just Death Care Technology folks trying to help humans with death literacy and navigating the logistics of loss. If you need specific advice about your individual situation we recommend you do specific research for your state and/or reach out to a legal professional.