Death of a Taxpayer

When someone dies, their tax obligations don’t die with them. Returns still have to be filed, and that job falls to the person handling the estate, usually at the worst possible time. Here is a plain-English map of what has to happen, in roughly the order it happens.

The personal representative is the executor named in the will or, if there is no will, an administrator appointed by the court. Their job is to collect the person’s assets, pay debts and taxes, file the required returns, and then distribute what is left to the heirs. If no one has been formally appointed, the IRS generally looks to whoever has actual control of the person’s property.

This matters because the personal representative can be held personally liable if they distribute assets to heirs before the estate’s taxes and debts are paid. Slowing down on distributions until the tax picture is clear protects you.

• Get an EIN for the estate. The estate is its own taxpayer and needs its own number. You can apply for free and get it immediately through the IRS website.
• File Form 56, Notice of Fiduciary Relationship. This tells the IRS who is acting for the person who passed, so notices and correspondence come to the right place.

Return	When It Applies
Form 1040 (final)	Covers January 1 through the date of death. Due April 15 of the following year. A surviving spouse can generally file jointly for the year of death.
Form 1041	The estate’s own income tax return, required when the estate earns $600 or more in gross income after death (interest, dividends, rent, and so on).
Form 706	Federal estate tax return. Required when the gross estate plus lifetime taxable gifts exceeds $15 million for a 2026 death. Also used to elect portability for a surviving spouse, even when no tax is due.
Form 709	Gift tax return, if the person gave more than $19,000 to any one recipient in a year.

Most estates never owe federal estate tax, because the exemption is now so high. The portability election is the piece people miss. Filing a Form 706 lets a surviving spouse carry over the deceased spouse’s unused exemption, which can matter a great deal later. The IRS offers a simplified late-election option for up to five years after the date of death, but it is far easier to handle it at the time.

The deadline for most of this is not the day of the funeral. It is the day the IRS would have expected the return anyway.

Income the person received before death goes on their final Form 1040. Income they had earned but not yet collected, such as a final paycheck, accrued interest, or the balance of a retirement account, is taxed to the estate or to the beneficiary who receives it, depending on where it lands.

There is also some good news. Appreciated property that passes to an heir, like a home or a brokerage account, generally receives a stepped-up basis equal to its value on the date of death. If the heir sells it soon after, much of the gain disappears for tax purposes. Retirement accounts do not get this treatment, which is why they get their own conversation.

• Request prompt assessment (Form 4810). Normally the IRS has three years after a return is filed to question it. This request shortens that window to 18 months, which lets the estate settle sooner.
• Request discharge from personal liability (Form 5495). Once returns are filed, the personal representative can ask the IRS to calculate any tax owed. The IRS responds within nine months, and once that amount is paid, you are released from personal liability for further deficiencies.

If the person who passed owned a business, there is more to wrap up: the books, final payroll and sales tax filings, 1099s, and a decision about what happens to the business itself. That work is very doable, but it is much easier with someone who understands both the bookkeeping and the tax side. Whether you are in Placerville, El Dorado Hills, or across the country, our team works with families remotely, so you do not have to sort through it alone.