Eatate Taxes

[Jim_Carmody]

My daughter died in 2020.  I filed her income taxes in 2021.  We were not able to collect her assets until 2021.  Those assets did not cover her funeral expenses and there was a number of other liabilities we were unable to pay.  I am required to file a report about the estate and, if so, what form do I use?

[tagteam · Accepted solution]

I am very sorry for your loss @Jim_Carmody.

The estate is not required to file a federal income tax return (Form 1041) unless it had gross income for the 2021 tax year of $600 or more.

See https://www.irs.gov/instructions/i1041#idm140229151947712

You might want to seek guidance from local legal counsel to ensure matters are wrapped up properly.

See https://www.avvo.com/probate-lawyer.html

[fanfare]

since the estate was depleted by funeral costs, etc.,  there is no need to file an estate tax return.

[Jim_Carmody]

Thanks for the update.  One further question.  If the creditors had forgiven the debt for my daughter while she was living, she would be responsible for reporting the income.  Does that change with the estate?

[tagteam]

It should not change, but this is precisely the reason you should consult with local legal counsel.

[fanfare]

 1099-C is considered income and is taxable and could be over $600.

But since the estate is depleted, there's no way to pay the tax.

Funeral costs come before all debts and obligations.

[tagteam · Accepted solution]

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@fanfare wrote:

 1099-C is considered income and is taxable and could be over $600.

But since the estate is depleted, there's no way to pay the tax.

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The debt was discharged prior to the death of the decedent so that would not be an issue, regardless, and particularly with insufficient assets. 

The 1099-C would be reportable on the decedent's final income tax return.