The ABC of Filing Tax Returns for the Deceased

The ABC of Filing Tax Returns for the Deceased

Death is an inevitable part of a human life. When a person dies, he leaves his mortal body but taxes may also remain attached to him or her. In fact after death, one final tax return needs to be filed for the deceased person.

After death, a person’s finances are immediately converted into something which is called an estate. The estate then has the responsibility of filing a tax return after covering the finances that include income and distributions to the heirs and other beneficiaries of the deceased.

When someone passes … Read more at 2010 Tax.

The ABC of Filing Tax Returns for the Deceased

Death is an inevitable part of a human life. When a person dies, he leaves his mortal body but taxes may also remain attached to him or her. In fact after death, one final tax return needs to be filed for the deceased person.

After death, a person’s finances are immediately converted into something which is called an estate. The estate then has the responsibility of filing a tax return after covering the finances that include income and distributions to the heirs and other beneficiaries of the deceased.

When someone passes away, an executor or trustee takes charge of the estate of that person. The exact designation depends on the type of estate they are intended to plan for. The executor or trustee will sign the tax return on behalf of the deceased person and will declare him or her as deceased.

For a deceased person, the final personal tax return is filed in Form 1040. Yes, the same tax form that is used for any personal tax return will work for filing a return for a deceased person.

The day of death of the deceased person is taken as the cut-off date to ascertain how much taxes are actually due by him or her. Whatever income the person may have made in that year before the date of his or her death is covered in the personal tax return. And, the income earned after the death is to be filed as the estate tax return, which is the responsibility of the estate.

In most cases deductions are certainly going to give a joy in case of tax returns for the deceased. You can claim a full deduction and any other expenses for the year that precedes the tax payer’s death not including the date on which the person passed away. In other words, you don’t have to worry about any calculations that are based off the days that come after death. For example, if a person passes away in the month of February, you are eligible for full write-offs for the rest of the year.

When the deceased is supposed to get tax refund, the IRS will consider releasing a refund if the deceased is reported as being married prior to his or her death. If the person was married, the spouse is entitled to receive the refund. If the person was not married, you need to file a Form 1310 to be eligible for the refund. This form is basically a declaration that states – you have the right to claim the refund and absolve the IRS of any involvement in any disputes that may arise in future.

Selecting between Standard & Itemized Deductions

Selecting between Standard & Itemized Deductions

Filing a tax return annually is an important part of your business activity. But as you prepare your tax return, there is one question that may pop up a lot. And that is whether you should itemize your deductions or prefer to go with the standard deduction that the IRS generally provides to its tax payers.

Theoretically tax deductions are considered a very simple component of the tax reporting system. But ask someone who prepares his tax return himself and you will learn it’s not as simple as it is usually considered to … Read more at 2010 Tax.

Selecting between Standard & Itemized Deductions

Filing a tax return annually is an important part of your business activity. But as you prepare your tax return, there is one question that may pop up a lot. And that is whether you should itemize your deductions or prefer to go with the standard deduction that the IRS generally provides to its tax payers.

Theoretically tax deductions are considered a very simple component of the tax reporting system. But ask someone who prepares his tax return himself and you will learn it’s not as simple as it is usually considered to be. To add to your worries is the lengthy and complicated tax forms. Keeping those complexities in mind it is often wise to just rely on the standard deduction given by the IRS. Or you could decide to go for itemized deductions. So, it’s important to find which deduction system will work best for you.

The standard deduction does not require any calculations or supporting documents and thus is the easiest way to go. You only need to calculate your annual gross income and then submit the calculated amount for your classification. The amount of taxable income differs based on your filing status. The eligible filing status’ are single, married (filing jointly or separately) or Head of Household. To qualify for head of household you have to be single and the primary or sole source of income for a household that includes qualifying dependants.

People may ridicule your decision to take the standard deduction. The fact is that with some types of tax issues, the standard deduction may not be the most suitable option. For people who have fairly simple financial transactions with a limited number of deductions, the standard deduction is usually the perfect choice. For example, if you are an employee of a company with an income of $50,000, you rent your home and don’t have any major medical bills; you are definitely a person more suited for the standard deduction. And whether an itemized deduction will work for you or not may not be clear to you unless you attempt to itemize your deductions in a rough draft of your tax return.

Itemizing your deductions means categorization of every possible deduction. Itemizing of deductions always works best if your financial transactions involve a significant number and volume of tax deductions. For example, if you own a home which entitles you to deduct your mortgage interest and your medical bills are stupendous, you would certainly be better off if you itemize your deductions. In reality, there is no ideal condition or situation where itemizing your deductions is the only option. The example quoted above aims at giving you an idea of the situation where you can itemize your deduction.

In nutshell, if your financial transactions are simple, the standard deduction may be your best choice while in the case of a complicated financial life, itemizing your deductions may optimize your tax return.

So, when your deductions are figured out, the next thing is to find out the taxable income. In order to get your net taxable income, you will have to subtract these deductions from your adjusted gross income. The tax is then determined using the tax tables.