Filing a Final Tax Return for a Deceased Taxpayer in Michigan
Losing a loved one is never easy, and dealing with their affairs afterward can be a complex and emotionally taxing process. One important aspect of probate and trust administration is filing a final tax return for the deceased individual. This process can seem daunting, but understanding the steps involved can make it more manageable. In this article, the Michigan probate attorneys of Thompson Legal provide an overview to filing a final tax return for a deceased taxpayer in Michigan, including the necessary forms, deadlines, and common issues that may arise.
Please note that this post is not exhaustive, and every situation is unique. In the event that you have legal questions it is advisable to speak with a licensed attorney. Contact Thompson Legal to speak with a Michigan Probate Attorney today.
Who is Responsible for Filing?
In Michigan, the responsibility for filing the final tax return usually falls on the personal representative or trustee of deceased individual's the estate. This is the person appointed by the court or estate planning document to manage the deceased's affairs. In the event that there is not a surviving spouse or appointed representative, a personal representative will file the final return and attach Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer.
Understanding the Requirements
When someone dies, their estate becomes a separate taxable entity. A final individual income tax return (Form MI-1040 and IRS Form 1040) must be filed for the deceased taxpayer, covering the period from January 1st of the tax year to the date of death. This return reports income earned by the deceased up to their death. If the deceased had not filed individual income tax returns for the years prior to the year of their death, you may have to file.
However, it's important to recognize that the deceased's estate may also have ongoing income after death, such as interest, dividends, or rental income. This post-death income is not included on the final Form 1040. Instead, it may necessitate filing separate income tax returns for the estate or a trust (Form 1041), depending on how the deceased's assets are held and managed. These returns ensure compliance with tax obligations for income generated after the individual's passing.
Generally, the same tax deadlines apply for final returns as for individuals. If, for example, the deceased person died in 2024, their final return is due by April 18, 2025, unless the surviving spouse or representative has an extension to file.
Information Needed to File
Preparing returns for a deceased individual will require a comprehensive understanding of the decedent's financial situation. The responsabile party will have to gather the following documents and information to prepare the final return:
Social Security Number of the deceased
Date of death
Death certificate
Income documents: W-2s, 1099s, interest statements, etc. for all income received up to the date of death
Information on deductions and credits the deceased was eligible for, including medical expenses ,charitable contributions, and business expenses.
A copy of the previous year's tax return may be required.
If a Form 1041 is required, the executor will need the trust agreement or other legal documents establishing the trust, as well as records of any distributions made to beneficiaries
Requesting Information from the IRS
As the personal representative or trustee of an estate, you may need to obtain tax information about the deceased from the IRS. This information can be crucial for accurately preparing the final tax return or understanding the deceased's tax liabilities. However, that becomes complicated when that information is lost, missing, or simply unknown by the fiduciary. In that case, the executor should follow up with the IRS to obtain prior records that may be available.
Obtaining Prior-Year Tax Returns:
If you require a complete copy of the deceased's tax return for a specific year, you can request it by submitting Form 4506, Request for Copy of Tax Return, to the IRS. This form allows you to obtain exact replicas of previously filed returns, including all schedules and attachments. This can be particularly useful when trying to reconstruct the deceased's financial history or verify the accuracy of previously reported information. Keep in mind that there is a fee associated with each tax return requested.
Tax Transcripts
For a more streamlined overview of the deceased's tax information, you can request a tax transcript. A tax transcript summarizes key information from the tax return, such as income, deductions, and tax payments. It can be a valuable tool for gaining a general understanding of the deceased's tax situation without needing a full copy of the return.
You can request a tax transcript online through the IRS website or by mail using Form 4506-T, Request for Transcript of Tax Return. Online requests are generally processed faster, but mailed transcripts offer the option to include specific income information from Forms W-2, 1099, or 1098. Additionally, if you request a transcript online, it will be mailed to the deceased person's address of record.
Updating the Deceased's Address
To ensure that all correspondence from the IRS regarding the deceased or their estate reaches you promptly, it's crucial to update their address on file. This can be done by submitting Form 8822, Change of Address, along with either Form 2848, Power of Attorney and Declaration of Representative, or Form 56, Notice Concerning Fiduciary Relationship.
Filing the Return
Filing a final tax return for a deceased loved one in involves a few key steps. First, gather all necessary documents referenced above, including the deceased's Social Security number, death certificate, and income records (W-2s, 1099s, etc.). The responsabile party may also be required to obtain an Employer Identification Number for the estate, if one was not created for the estate previously.
The return should be signed by the executor and include the date of death in the designated area. It's crucial to attach a copy of the death certificate, along with the relevant Letters of Authority or Trust Agreement to the return when filing. If you are paper filing your Form 1040, clearly mark it with "Deceased" and the date of death at the top. Also remember to retain copies of all tax documents and supporting records for your files.
Addressing Unique Tax Situations
Certain circumstances may require special attention when filing a final tax return. These include:
Income in Respect of a Decedent (IRD): This encompasses income earned by the deceased before their death but not received until after, such as unpaid wages or royalties. IRD is taxable to the recipient, whether it's the estate or a beneficiary.
Capital Gains and Losses: If the deceased held assets that appreciated or depreciated in value, these gains or losses may need to be reported.
Estate Taxes: While Michigan does not have a state estate tax, federal estate tax may apply if the deceased's estate exceeds a certain threshold.
Preparing a final tax return can be complex. Consider consulting with a tax professional or an attorney specializing in estate matters, especially if the deceased had complex financial affairs, the estate includes significant assets, or you are unsure about any aspect of the filing process. In those cases, it is advisable to speak with a legal or tax professional about your case.
Conclusion
Filing a final tax return for a deceased loved one in Michigan can feel like a daunting task during an already difficult time. However, by understanding the process, gathering the necessary documents, and seeking professional help when needed, you can ensure that this important responsibility is handled correctly. Thompson Legal's experienced probate attorneys are dedicated to providing compassionate and comprehensive support during this difficult time. To schedule a consultation and discuss your specific needs, please visit our Contact page.
This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a Probate Attorney, please Contact Thompson Legal at (734) 743-1646 to schedule a consultation.
