Unusual Decedent Return

[DaveO]

Client’s father died April of 2004. His father’s long time accountant prepared the 2004 return. The 2004 return showed over $70,000 income from investments, a closely held S-Corp and directors fees. Our client brought in the 1099 Div and 1099 Int forms along with a 1099 Misc for directors fees. He said we needed to do the final return. I said no we should do an estate income tax return and the 1099 for directors fees was in error since no personal services could have been provided. They had not taken an ID # out for the estate and the investment income only totaled a couple of hundred dollars so I was inclined to say no return was needed until I noticed the there were tax refunds carried over on both the Federal and State return. Clinet contacted the 1099 Misc issuer who agreed it was in error. The deceased father’s accountant (an EA) maintained that it was proper not to file a final return since there would be some income in 2005 since the accounts were not transferred. I said sure, IRD, that would be on the 1041 or the bene’s 1040.

Should I amend the 2004 1040, pull a ID# and do a 1041 or a 2005 1040, or maybe just send it all back to the old accountant?

[Jiggers]

Dead Folks

No 1040 for 2005 if the taxpayer died in 2004. All income up to date of death should have been on 1040, and the rest should have been on 1041 Estate. This should have been done, even if all 1099's etc. were in the taxpayer's ID number and not in the estate's number.

You would do a "nominee" for the income after the date of death from the 1040 to the 1041.

[Koss]

Dead Taxpayers

There's a legendary guide to the bodyguard professiona that you can still buy on the internet. The title: Dead Clients Don't Pay.

But this maxim probably doesn't apply to the tax business.

I'm just babbling here. I don't really have an opinion on the original post.

Maybe I'm warped, but I have always considered it something of an honor to prepare the final return of the decedent. I enjoy the process because if it is handled properly and with the right kind of sensitivity to the surviving family, it can be very rewarding.

In many cases, but not all, the final return of the decedent is literally the very last thing that the surviving spouse (or other family member) does for the person who died. While I may be preparing the return in a professional capacity, the client and I take on a joint responsibility for completing and filing the return for the decedent.

The client is not the taxpayer. (And the map is not the territory. Okay, never mind.)

In some of the more extreme cases, the person may have died in January or February, but somehow had meaningful income shortly before death that same year.

The widow or widower comes to see me more than one year later, say, in late March, the year after the spouse died. And sometimes the jaw drops open when I gently explain that they are still filing a joint return.

But even when the length of time between death and the final return is much shorter, the final return of the decedent, for low to middle income clients who often have no estate return, is usually months after the funeral.

Sometimes the client is uncomfortable with the process, for obvious reasons. Other clients may be interested only in recovering yet more money from the person who died.

But for many clients, when the final return is handled well, many months after the funeral and other events that follow death, the filing of the final return can bring a sense of real closure.

Maybe I'm just a nut case. But in financial and economic terms, the final return is the closure. For tax professionals, the final return reflects a certain endpoint that people outside our profession may not appreciate. Until they actually have to go through the process for one of their loved ones.

Burton