Your Tax Questions Answered

The Paperwork a Small Estate Demands

Kiplinger editorial director Kevin McCormally and fellow tax experts Peter Blank and Mary Beth Franklin tackle your most pressing tax challenges

By Kevin McCormally, Editorial Director, Kiplinger.com

January 7, 2010

QUESTION:

My mom died last month unexpectedly (and so did my accountant). I am the only child. We had two checking accounts so those passed to me. She had two small IRAs which I cashed in. She did not have real estate, so there is nothing else in the estate except an old car to sell. She has not had to file tax returns for many years. I went to probate court and was able to use a short form "dispense with administration" because of the low amounts involved in the estate and the fact that I am the only one left.

Now I check the Internet and see a bunch of forms that may have to be filed (1040, 1041, 706)! They say to file the same returns she always had used -- except she has not filed for many years because she only had Social Security and the small amount of interest income (maybe $1K) never got close to any limits.

Can you help me or point me somewhere to get some info about what forms you HAVE to file for people who pass away without a bunch of money?

KEVIN ANSWERS:

First, my condolences on your mother’s death (and your accountant’s). Based on the information in your note, I don’t think you’ll need to file a return for your mother or either an income tax or estate tax return for her estate.

An income tax return for an estate (Form 1041) is due if the estate has more than $600 of gross income. But, it doesn’t sound like your mother’s estate will breach that ceiling. The two checking accounts became yours immediately upon your mother’s death, so they produced no income for her estate. Since the IRAs also became yours, any income from cashing them in is your income, not the estate’s.

When it comes to a personal income tax return (1040), your mother’s death does not alter the basic rule that such returns are due only if the taxpayer’s income exceeds certain levels. If your mother hadn’t been required to file in earlier years and her income was about the same for 2009, it’s doubtful a return needs to be filed for her for 2009.

As for the estate tax return (706), for 2009, no estate tax is due unless the estate exceeds $3.5 million.

You might find this IRS publication 559 helpful. Good luck.

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