My father passed away in January 2020, and my mother filed a final joint tax return for 2020. She no longer has any income (other than social security) and is not required to file a tax return for 2021. Before my father passed away, my parents placed most of their assets in a joint living trust. The only assets that were not placed in the trust were a business checking account (which was attached to a sole proprietorship that was owned in my father's name only) and 2 cars (both more than 20 years old).
The sole proprietorship was a small auto repair shop that was closed soon after my father passed away. No probate or estate tax return was needed. My parents have only resided in California.
Wells Fargo sent a letter that they were going to file a 1099-C for forgiven business debt (about $51,000) in my father's name and social security number for the date of 12/31/2021. We have not received an official 1099-C form yet, only a statement. (We anticipate another 1099-C from Bank of America for other forgiven business debt, possibly in 2022; we are working with BofA to close the business checking account still. No funds have been distributed to my mother from the BofA business checking account yet.)
When I asked several accountants, one CPA said that we should file a 1041 for my father's estate along with a 982 for insolvency. Another CPA said that my mother may need to file another joint tax return because she is responsible for my father's cancelled debt since my parents resided in California, a community property state. However, the cancelled debt was issued after the final joint tax return was filed last year.
What should we do? I have reached out to a tax attorney but they are slow to respond since it is tax season. We are getting anxious because the April 15 deadline is fast approaching.
I understand from other posts here that the 1041 and 982 forms seem to be the correct response to a deceased person's 1099-C. Is this something fairly simple that we can do using Turbo Tax?
We would greatly appreciate anyone's help!
