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Filing personal/business taxes for 2020 and 2021 for deceased brother who passed in late 2021 with limited information?

Hopefully I can make this question(s) clear. My brother came down with brain cancer in 2020 and never filed his taxes for 2020 in 2021.  He passed away in late 2021 and left everything to a trust. I need to file taxes his final tax return, but I have very limited info. Basically I have his 2019 return, and 2020-2021 bank statements (sales income, personal , business spending). Due to the Covid shutdown he did not make mush money in 2020 and almost nothing in 2021.

My questions are these:

Do I need to file for 2020 and separately for 2021?

Since accurate info is limited how much can I estimate, or can I estimate?

Can I use TurboTax and if so what version, I think I need the small business version?

Any other potential things i may not have though off?

 

Thanks

 

 

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4 Replies

Filing personal/business taxes for 2020 and 2021 for deceased brother who passed in late 2021 with limited information?

You should go to a local CPA or EA enrolled agent to do them right.

Filing personal/business taxes for 2020 and 2021 for deceased brother who passed in late 2021 with limited information?

Do I need to file for 2020 and separately for 2021?  Yes each tax year is filed separately and may need separate programs if the business was incorporated.

 

Since accurate info is limited how much can I estimate, or can I estimate?  The person in charge of the getting the returns filed can get info from the IRS to see what was reported as far as income ...  read up on the IRS site for the PR duties : https://www.irs.gov/taxtopics/tc356

 

 

Can I use TurboTax and if so what version, I think I need the small business version?  Depends on if the business is incorporated ... if so a business version will be needed in addition to a personal return ... and both years will have to be mailed in if you use a DIY program.

 

Any other potential things i may not have though off?  More than can be counted ... the trust may also need to file a return as well as the estate ... so as already mentioned getting local professional assistance would be best.  

Filing personal/business taxes for 2020 and 2021 for deceased brother who passed in late 2021 with limited information?

Unasked question:  Do you have to file at all?  His final business and personal tax returns are to be filed by his personal representative or executor.  Is that you?  Maybe there is someone else involved with the trust, an executor or trustee?  That's the person who is required to file.  In some cases, the responsible person for the business return might be different than the responsible person for a personal return.  We don't know the whole story, if there was a trust, there was probably an attorney to set it up.

 

Then, he must file for 2020 and 2021 if he is required to file (more income than certain limits).  Basically, if his business has a net profit of more than $400, and if he personally has more than $12,550 of taxable income, although this can get quite complicated.

 

The type of business return depends on the type of business.  If it is a partnership, an LLC with more than one owner, or an S-corporation or C-corporation, the business files a separate tax return and requires the Turbotax Business version.   If it is a sole proprietorship or single-member LLC, he would file a schedule C included as part of his personal tax return, this would use the Turbotax Home & Business version.

 

Even if he had no business income, a return might need to be filed to close the business and dispose of business assets or inventory.  Depending on the type of business, he might have assets that were sold or dispersed to his heirs (tools, computers, vehicles, etc.), or inventory that was included in a previous year's costs and either sold at a loss, or given away, or destroyed, all of which might have tax consequences to the business.

 

If he required a separate business return, the late penalties are substantial.  There are ways to request a waiver for cause.

 

You can request a transcript of his past returns, this may help you gather the information you need.  You will need to do this in writing and attach proof that you are his legal representative (if you are in fact, he legal representative for tax purposes).

 

I agree with seeing an accountant.  They can tell you what to look for in his papers and his bank accounts to put together a tax return.  You need business records, bank records, 1099s, and so on.  If his clients issued 1099s, you can get copies from the IRS.

 

If audited, you must prove what you filed.  If you can't prove what you filed and the IRS says different, the IRS can assess additional tax.  This can be complicated.  For example, if he had a weekly cash deposit to his bank account of $100 per week which was a gift from a friend for medical help, but you can't prove it was a gift, the IRS could call it business income.  Or if he got a 1099 from a GoFundMe for medical expenses, but you can't prove it, the IRS could call it business income. Of course, most people aren't audited.

 

But here, it really does pay to hire someone to help you.  His final returns can be audited for 6 years from when they were filed, and you don't want to get a bill 6 years from now that you would have to pay (assuming his excess funds after taxes were dispersed to his heirs, the heirs would have to pay back any tax assessments.)

Filing personal/business taxes for 2020 and 2021 for deceased brother who passed in late 2021 with limited information?

Thank you for the information, this has been very helpful. I will probably try to do the filing myself. I managed to file all the trust/will documents, sell the store inventory, and dispose of real estate without help. I had a trust lawyer review my work and he did not find any errors of omissions. 

 

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