filing for father who passed away

this is gonna be kind of long. my father in law passed away in March of 2021, we went through probate had a lawyer and everything but was never told anything about file a final return for him. He did work since he had been sick since Jan. but did collect rental income. so i don't know what to do. and next question i also just learned that we need to file on the property that we inherited it is rental property and i have no clue where to even start i do keep records of everything

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KristineS

Hi shanneyross73,

Sorry to hear your Father-in-Law passed away.

When he did pass, the executor of his Will or the person appointed by the court as a personal representative would file a final return for him. That sounds like you. You may have to recreate his income records for that year to the best of your ability, including the rental income. You can request all income reported to the IRS under his name and SSN under Wage and Income transcripts from the IRS after creating an account online as his personal representative.

You may also need the help of a paid tax professional in order to sort out his income received before he passed away, and then income his estate received after he passed away to file correctly.

It sounds like he may have something called Income in Respect of a Decedent (IRD) which means income your FIL would have received had his death not occured and which isn't included on his final return.

In addition, an estate tax return is not something you would generally create on your own if you are unfamiliar with the process. If there are beneficiaries such as yourself and/or others and you inherited rental houses for instance, are they still being rented? Were they sold? Was an evaluation performed on each house to determine it's Fair Market Value or adjusted basis at the time of your father-in-law's passing? There are many details to sort out.

My recommendation is to contact a local paid professional in your area. Use this link here to find a CPA or this link here to find an Enrolled Agent.

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shanneyross73

maybe i didn't ask the right questions. the lawyer never said anything about filing a final tax return for my father in law, so do i need to. and do i need to file all the estate tax forms. and what all forms do i need to fill for the inherited rental properties

KristineS

Hi shanneyross73,

Sorry to hear your Father-in-Law passed away.

You may also need the help of a paid tax professional in order to sort out his income received before he passed away, and then income his estate received after he passed away to file correctly.

My recommendation is to contact a local paid professional in your area. Use this link here to find a CPA or this link here to find an Enrolled Agent.

Henry

Hello shanneyross73, I am sorry to hear of your loss. How you need to proceed in this situation will depend on a few things.

Is there no surviving spouse? Are you or your spouse the personal representative of the estate (the person in charge of your father-in-law's property)? If so, the personal representative is generally responsible for filing any final individual income tax return and the estate tax return of the decedent when due. First, I would recommend reaching out to the lawyer to find out if any filings have already been done for your father-in-law and for the estate for 2021.

A final tax return for your father-in-law may or may not be needed, depending on the circumstances. You can go to the following IRS website and enter his information to see if one is required in this situation: https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return

If you find that you do need to file a tax return for your father-in-law, you can go here to start a 2021 tax return in our 2021 software. On the Taxpayer Information screen, you will see a question that asks, "Has this person passed away before the filing of this tax return?" When you select YES, a field will appear where you are prompted to enter the date of death. These entries make it so that the necessary information is printed across the top of the return, letting the IRS know this is your father-in-law's final tax return.

In most cases, the final return only needs to show the income received by your father-in-law prior to his death, and you would claim deductions for any expenses he paid before that date (such as rental expenses), as well.

When you are done, if your father-in-law is owed a refund, then it may be necessary to file Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer with the return. That can be done by using this menu path: Misc > Personal > Deceased Taxpayer or Spouse (Form 1310).

When it comes to filing an estate tax return, any income (such as rental income) that a decedent's assets generate is part of their estate and may trigger the requirement to file an estate income tax return. Form 1041 is required if the estate generates more than $600 in annual gross income. Unfortunately, our software does not support the preparation of Form 1041, so you would need to find another way to file that form if it is required. An estate tax return generally needs to be filed for each year until the year that all of the assets have been distributed to the beneficiaries.

Another thing to consider is that the personal representative may be required to file Form 706 if the gross estate of the decedent was valued at more than the filing threshold for 2021 ($11,700,000).

When it comes to what you need to report on your tax return, if you/your spouse are beneficiaries of the estate, then the income distributions that you received from the estate should be reported to you on Schedule K-1 when the Form 1041 is prepared, and that Schedule K-1 information would need to be included on your personal 2021 tax return by using this menu path: Income > Uncommon Income > Estate and Trust Income (Schedule K-1).

Once the estate is terminated and the rental property officially belongs to you, you can report any rental income and expenses on your tax return by using this menu path: Income > Business Income > Rental Income (Schedule E)

I know this is a lot of information! If you still have questions, here is a great IRS link you may want to refer to that provides more details about the filing requirements for a deceased person: https://www.irs.gov/individuals/deceased-person

You can also check out IRS Publication 559, Survivors, Executors, and Administrators.

shanneyross73

Thank you all so very much for all the information. As to

https://community.freetaxusa.com/discussion/comment/1241#Comment_1241

Thank you very much for the information. And the thing is we settled his estate in Nov 2021 and all assets were distributed then. And we never heard anything about having to file a tax return. And he hadn't done any work that year because he had gotten Covid in Jan. But he did collect rent up until The month he passed away. and all money we collected from his rental property went toward all his bills, Lawyer fees and paying off a loan on 2 properties he had. we paid the bills at his house while my husbands brother and niece lived there for free. Some of the money came out of our own pocket. The only things inherited were some old cars and rental property that was divided between his 3 sons. i will visit the links you provided me but right now i am so lost and that usually doesn't happen esp. so thank you for pointing me in right direev43

shanneyross73

the estate was over in Nov 1 2022. My husband was the one taking care of everything and i helped him.

im just a little nervous because it has been a few years