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Kaufman & Canoles, PC - Attorneys
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In additional to other estate administration duties under Virginia law, a personal representative (executor or administrator) of a decedent's estate has the duty to file when due a final income tax return for the decedent for the year of the decedent's death and any prior tax returns that were not filed.
For example, if John Smith died in February 2003 before filing his individual income tax return for the 2002 tax year, tax returns must be filed for 2003 and 2002, assuming tax returns are due based on the income and circumstances of the decedent.
The gross income, age and filing status of the decedent will determine if a return is required. A tax return should be filed in any case if there will be a refund based on prior tax withholding or estimated tax payments.
The personal representative and a surviving spouse may generally file a joint return for the decedent and the surviving spouse. The surviving spouse can file alone if no personal representative has qualified on the estate prior to the due date of the return.
The final income tax return is due at the time the decedent's tax return would have been due if he or she had not died - generally April 15 following the year of death.
The IRS takes the position that it is the duty of the personal representative to file all tax returns when due. Failure to timely file required tax returns can, without reasonable cause, result in penalties.
If an estate is insolvent (where the assets are insufficient to pay the debts of the estate) the IRS takes the position that any income tax liability must be paid first before other creditors and beneficiaries. A personal representative can be held personally liable for any tax liability of the decedent that is not paid where the personal representative had notice of the tax obligation and failed to determine the liability before distribution of the estate assets.
Final Virginia income tax return(s) for the decedent may also be required, and are filed on Form 760 in essentially the same manner as other individual state income tax returns.
Obviously, an in-depth discussion of tax filing requirements is beyond the scope of this discussion. The most important point to remember is that a personal representative can be exposed to personal liability for failing to properly handle tax filing requirements.
If you are acting as a personal representative and you are not a tax professional, it is recommended that you obtain the services of a professional to insure compliance with applicable tax laws.
The expenses of such professional assistance is normally considered an administrative expense of the estate, payable from estate assets and not by the personal representative personally.
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