Tax Payments
Ensuring that the necessary tax returns are prepared on behalf of the decedent’s estate and that the tax is paid is a responsibility of the personal representative. A final lifetime individual income tax return (Federal Form 1040) for the decedent usually will be required. This return includes only income earned through the date of death. Income paid after the date of death should be claimed on the estate’s income tax return. This return is called a “Fiduciary Income Tax Return” (Federal Form 1041). Corresponding Minnesota tax returns also must be filed. It is important to work with someone who is familiar with preparing decedents’ final lifetime returns and fiduciary returns so that income is reported and deductions are claimed on the proper returns. If timely filed, certain elections may be taken to minimize the tax owed.
If the gross estate (i.e., the value of all the decedent’s property) is near or exceeds certain thresholds, federal and Minnesota estate tax returns must be filed. The estate tax is based not on the income of the decedent or the estate, but the value of the decedent’s property. These tax returns are quite complex and they must be filed along with the taxes owed within nine months after the decedent’s death, unless an extension is granted. Failure to file and pay the tax may result in the assessment of penalties and interest against the estate or personal representative. If the decedent held property in a state other than Minnesota, there may be additional returns that need to be prepared.
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