Accounting Year

[rlevenberg]

In January 2024, the Court appointed me as executor for the estate of my father, who died in May 2023.  When filing for an EIN from the IRS, what date should I specify as the closing month for the accounting year?

[Opus 17]

That's up to you.  December will be easiest, of course, since it will match the availability of the various forms and instructions.  But if your father's estate will have income in 2024, you might need to file estate returns for both 2023 and 2024.  If you picked May April 2024 (the latest date you could pick), and if your father's estate is ready to close by then, you would only have to file one estate return.  

[tagteam]

I am sorry for your loss.

If you select a fiscal year, that year would begin in the month of your father's passing and end twelve months later.

In your case, the fiscal year would begin in May of 2023 and end on April 30, 2024.

@rlevenberg 

[dmertz]

Although it might be customary to have an estate's fiscal tax year end on the last day of the month prior to the month that contains the anniversary of of the decedent's death, the instructions for Form 1041 indicate only that end date be the last day of some month:

Accounting Periods
For a decedent's estate, the moment of death determines the end of the decedent's tax year and the beginning of the estate's tax year. As executor or administrator, you choose the estate's tax period when you file its first income tax return. The estate's first tax year may be any period of 12 months or less that ends on the last day of a month. If you select the last day of any month other than December, you are adopting a fiscal tax year.

[tagteam]

Correct, but I was stating the maximum period of time that would be permitted for a fiscal year (i.e., 12 months).

Of course, it could very well be less than 12 months but there doesn't appear to be much to be gained in this particular case (in fact, the opposite appears to be the case). 

The April 30th date would also give @rlevenberg until August 15th to file the return.

[dmertz]

Depending on what income is received by the estate and when, it might be beneficial to select a fiscal year that results in that income being split over the two of the beneficiaries' tax years, if possible.  One could establish a timeline for the income and then slide a 12-month window over that to determine which month makes the most sense for the ending month of the fiscal year.  With the estate not having an executor until January 2024, it's entirely possible that the estate's income to date has been low enough that the first Form 1041 required to be filed might be for a fiscal year ending in 2025, which would establish the estate's fiscal tax year.

[tagteam]

Yes, it certainly is dependent upon whether or not the estate has income and I was making that presumption when I posted my first message. 

Clearly, it would be best to hold off if the threshold for filing would not be met.