Tax Obligations for Estate Executors

ions for Estate Executors

Tax Report


The executor of an estate has many ongoing obligations, including filing applicable tax returns. On the federal level, nearly all estates must file a final income-tax return for the decedent. Additionally, the executor may need to file one or more federal incometax returns and an estate-tax return for the estate. (States have different filing requirements.)

Final Income-tax Return The executor has the responsibility for filing the final income-tax return (Form 1040). Because most individual taxpayers file on a calendar-year basis, the final tax year will typically cover the period from January 1 through the date of death. The final return is generally due on April 15 of the year following the date of death. An automatic six-month extension may be obtained by filing Form 4868 and paying any tax due with the extension.

The executor may file a joint incometax return with the decedent's surviving spouse, provided the spouse has not remarried by year-end. Filing jointly can offer certain tax advantages, but it may not be the best option in all cases.

Estate Income-tax Return Generally, the executor is required to file an income- tax return (Form 1041) for the estate for each tax year in which the estate has gross income of $600 or more. Because the decedent's final tax year ends on the date of death, the estate's first tax year begins the following day. The executor may elect to use a calendar or fiscal year. Careful consideration should be given to this decision because, in some cases, the executor may obtain additional tax deferral for a beneficiary by electing a fiscal year that ends after the close of the beneficiary's taxable year.

The Estate-tax Return Because the exclusion amount is quite high — $5.43 million for 2015 — many estates will not owe any federal estate tax. However, if the decedent was married, the executor may want to file an estatetax return anyway. The reason: The tax law allows a married person's executor to make an election to pass the deceased spouse's unused exclusion amount to the surviving spouse for eventual use on his/her own estate-tax return. Generally, this "portability" election must be made on a timely filed estate-tax return of the first spouse. Therefore, if there is any chance that the surviving spouse's entire estate (including the amount passed from the first spouse) will exceed his/her individual exclusion amount, the executor for the first spouse will want to file an estate-tax return to make the portability election.

New HSA Numbers The IRS recently announced the 2016 inflation-adjusted figures for health savings accounts (HSAs). Generally, HSAs are available to individuals who are covered by a. high-deductible health plan (HDHP) and are not covered by another plan.*

Contributions to HSAs are tax deductible (within inflationadjusted limits), and distributions are tax-exempt when used for qualifying out-ofpocket medical expenses (e.g., deductibles and co-payments, but generally not premiums) of the account holder and his/ her spouse and dependents.

For 2016, a qualifying HDHF's annual deductible must be at least 81,300 for self-only coverage or $2,600 for family coverage. Additionally, annual out-of-pocket expenses may not exceed $6,550 for self-only coverage or $13,100 for family coverage. The 2016 t 'taxi:mum HSA contribution limits are $3,350 for a person with selfonly coverage and $6,750 for a person with fantiTy coverage.

* Dental, vision, long-term care, and certain other types of coverage are permitted.

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