I have a person who died in 2022. Although he didn't need to file a return because his income was so low, he filed a return himself for years with no tax due for years. The person taking care of his estate is my client. She asked me to prepare his last return if necessary. If his income falls in line with his past returns, he wouldn't have to file due to his low income (even with SS). I checked different places and got different answers to that question. I figured I would do the last return because it is his last return and would mark the return accordingly about being deceased. Also, I told her to get someone else to prepare the estate return if need be. Should that person do the deceased return also instead of me if necessary? Any opinions or 100% correct answer whether it is "required"? Thanks for any help!
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It definitely isn't "required" for the same preparer to do the 1040 and 1041, but it often may make sense to do it that way. Some items may need to be figured out where they belong, or in some cases maybe divided and apportioned between the two, so it may be easier for the same person to do both returns rather than both preparers needing to figure out the same things (and be in agreement with each other).
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My practice is to always file, even when below the filing requirement. Then the SOL starts running, just in case some unknown income was missed, which is more likely with elderly &/or ill clients having less energy to track their financial lives. ID thieves swoop in to file returns for elderly people who stop filing (and for children who haven't started filing). And, as you say, you mark him Deceased. That said, I also agree that it makes sense for the same person to prepare both the final 1040 and 1041 for reasons as was mentioned, allocating interest earned, that kind of thing.Comment
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I haven't seen any of the paperwork after his death. Although I'm sure I could do the estate return, I don't feel comfortable enough doing it. I have someone that would do it if need be. I did tell her that I could do the last tax return for him if she wanted and let the other person just do the estate return (although from what she told me about the estate, I don't think it would have to be done due to his income and assets). I would feel more comfortable doing a final return even if it is not required to. Thanks for all your info. It was very helpful! Any other thoughts are welcomed too!Comment
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Don't confuse the preparation of a 706 (Estate) tax return with a 1041 (Fiduciary) return. An estate return involves recording of assets and liabilities as of date of death. A fiduciary return reports
its share of taxable income and tax deduction items after death.
Normally after a person passes away, you need to allocate the income earned both before death and after death if the financial institutions haven't been notified of date of death.
From what you've stated since the deceased didn't have sufficient amount of assets to require a 706, if he/she had any assets at all that produced taxable income, then a 1041 would most
likely be necessary.
Uncle Sam, CPA, EA. ARA, NTPI FellowComment
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