Tax Law (Questions About Taxes)/Final Estate Tax Return

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QUESTION: My wife's aunt died in Nov. 2011.  I learned in May, 2012, that she had US Savings Bonds, and no interest had been paid on them.  So I filed amended returns for 2008, 2009, and 2010, adding  the interest on the bonds, since she was in a nursing home for years.  I filed a final tax return, deducting all the remaining interest on bonds up to her death.

The interest remaining on the bonds is $464, since her death.  The bonds were sold in Jan. 2013, with the proceeds put into her estate account.  My question is how do I file a final estate tax return?  Can I still file this year on a fiscal year basis?  The only money in her estate account was the sales of her bonds.

ANSWER: Willard,

Thanks for your question.

Since you filed a final return, if you marked it as final, the federal ID number would no longer be an active number. From the IRS view, the estate no longer exists.  I would include the income on the return for whoever received the proceeds.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Thanks for quick response.  At this point, when I check IRS status of my aunt's 2011 tax return, it is still being processed.  I mailed it on Sept. 24, 2012.  So I am assuming the federal Tax ID still exists.

After reviewing copy of 1040 tax return for 2011, I see nothing about being a final tax return.

So if this is case, can I file a final estate tax return, and if so, when can I file it?

ANSWER: I'm confused. You stated the 2011 1040 was not marked as final.  I thought we were talking about a 1041.

Are you talking about a 1040, Individual Income Tax Return; a 1041, Estate Income Tax Return; or 706 Estate Tax Return?  My assumption was that you were referring to a 1041. If this is the case, and you did not mark the return as final you can file the income on a 1041 using the estate tax ID.  Since it is a 2012 return you would be filing, you can file it at any time - marking it as final.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Sorry about confusion.

I have never filed a 1041, only 1040 amended returns and a 1040 return for 2011.  That is why my question on using a 1041.  Even though I have funeral expenses of over $3000, I see no need to do a 706, since the only interest left to pay on US Bonds is $464.

Based on what you told me, I can file a final 1041 and explain to IRS all interest on Bonds was paid in amened return 2008, 2009, and 2010, and 1040 return in 2010.  With exemption of %600 for 1041, no money should be due IRS, based on my assumptions.

Answer
So, you did not mark on the 1040 that she was deceased, as is required by IRS regulations?  

Since you have never filed a 1041, do you have a tax ID number for her estate?  If so, you can file a 1041. Otherwise, you will have to get one and file a 1041 or just include it on the 1040 for the beneficiary.  In filing a 1041, you can choose the tax year for the return but the first tax year must end no later than 12 months after death.

You have made this whole process entirely too complex.  U. S. savings bond interest may be reported when the bonds are redeemed in addition to reporting the amount each year.  So the interest up to date of death could have been reported on her final return.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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