Filing for deceased

[confusedrf]

My mother-in-law passed away and my wife asked me to try to use TurboTax to do her final taxes.

TurboTax immediately asked if she was deceased to which I responded yes. And then walked me through a whole bunch of stuff perhaps everything it could. In the end all I really input was her social security, $100 or so in interest and the amount she spent on her live in care and medical equipment costs. I'm like prior years she had no massive distribution to pay for a 24/7 care... Sadly the money was just about out.

It prompted me about getting a letter from the IRS  about 1400...my wife said she never did and checked my mother-in-law's account and never saw in March 1400 check deposited. Also I know Mom paid taxes on her house because I was looking through the settlement paperwork and I saw they were prorated for the person who bought the home back in september. My wife does not know if she has those figures and I'm wondering if I even need to enter them because TurboTax is saying she owes nothing... Without answering the taxes.

The only thing that bothers me to a small degree is it says she's entitled to a $1,400 refund. I questioned this because I'm not sure why she wouldn't have gotten the check last year unless the fact that she cashed in a large amount of her investment in the prior year to cover her 24/7 live in perhaps put her in an income bracket that wasn't allowed to get the $1,400?

Any thoughts on this? TurboTax asked me nothing about her estate,  the house sale and stuff like that so I will assume it's not apropos for filing taxes..

Any comments on the $1,400, perhaps things to know or consider when filing for a deceased person or what happens to your estate and how it impacts your taxes .....I'm open to reading. Otherwise this actually looks like it was pretty straightforward.  I'll be it sad.

[DianeW777]

The house sale: If your mother-in-law as still alive when the house was sold, the house may not have a taxable gain if she lived in the home 24 months of the immediate five years preceding the sale and if the gain is $250,000 or less.  If that's the case then you do not need to report that if you did not receive a Form 1099-S.  

If you did receive the form, then you may want to report the sale to show it was eligible for the home sale exclusion.

If the house was sold after your mother-in-law passed away, then the sale is potentially an inheritance reported on the return of the beneficiary. That person would not be entitled to an exclusion unless it was also their home and they lived there for the required period.  Instead this would be a sale of inherited property.  Inherited property has a long term holding period and has a cost basis, for the beneficiary, of the fair market value (FMV) on the date of death.

Is a deceased person entitled to 3rd stimulus check?

Yes. If you are referring to the third economic impact payment (3EIP). File Form 1310 with the tax return as the deceased taxpayer's representative. The rule is that a person who died before January 1, 2021 is not eligible.

IRS FAQs for 3EIP: Look under the question 'Will a deceased individual receive the payment?'

To cash or deposit the payment on behalf of any other individual who died in 2021:

• Include one of the following:
  • If you're not the court-appointed representative – A completed Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer
  • If you are the court-appointed representative – The court certificate showing your appointment.

[confusedrf]

She passed away mother's Day 2021 in the house was sold September 2021. Her two daughters were the beneficiaries. Interesting question on how it affects the daughter's taxes. My wife said there was an account her mother-in-law held at all monies went through all taxes were paid and there was no tax due for her or her sister to report.

The $1,400 check in question would have gone to my mother-in-law when everybody got theirs last March  of 2021. She was still alive then but did not get the check and I'm wondering if this was because in the prior year her taxable income was too high.  I just find it weird that somehow she's now eligible for it but that's what TurboTax tells me .

[ErnieS0]

The Recovery Rebate Credit is based on 2021 taxes but the IRS used 2019/2020 numbers to send out the advance payment (third stimulus).

If your mother-in-law cashed out large investments in 2020 it makes sense she would not have received a stimulus payment because her 2020 income was too high.

However the payment is actually based on the 2021 return, so she would get the $1,400 added to her return if she meets the rules for 2021.

If the home was sold through an estate, the estate would have paid the tax and the beneficiaries would receive the proceeds tax free. Income from the estate would be passed down via Schedule K-1s.

[confusedrf]

We just printed my mother-in-law's return. I did notice at the top it says deceased. I did change the address to be my wife's address since she has been handling the estate stuff.

Question, my mother-in-law, though deceased, is apparently  getting back $1,400. Will they automatically send that check in my mother-in-law's name to my wife's address..... as indicated on the return?  My wife would inherit  this money. Is that taxable next year? Your state lawyer said no....feelanodd.

Before I send this off is there some form... I thought I heard somebody mention a 1310 form that my wife has to fill out... To get this $1,400?

I'm ready to mail this I just want to make sure everything is correct . TurboTax hasn't included any other forms so I'm just a little confused as to what happens with the refund, where it goes etc....

[DianeW777]

Yes. The check should come to the address on the tax return and in the name of your wife if the Form 1310 has been completed and filed with the tax return.

Yes, you can file IRS Form 1310 in TurboTax to claim the tax refund for a decedent return (a return filed on the behalf of a deceased taxpayer). Here's how:

1. Open the Personal Info section of your return
2. Answer Yes to I'm preparing this return for Taxpayer, who has passed away and provide the date passed away
3. Search for form 1310 and select the jump to link
4. On the Complete a claim for refund screen, select Yes
5. Continue through the screens. We'll give you the option of paper-filing the form by itself or including it with the decedent's return when filed.