What tax returns does an estate representative need to file?

On Behalf of | Jun 26, 2024 | Probate |

When someone dies in Texas, an adult has to assume responsibility for their estate. The personal representative of an estate oversees probate proceedings, fulfills the decedent’s obligations and distributes their property according to the law or estate planning documents.

One of the numerous responsibilities during estate administration is the fulfillment of tax obligations. The personal representative of the estate may actually need to file income tax returns as part of the probate process.

The decedent’s last income tax return

Once someone begins working or earning income, they have to begin paying income taxes. The Internal Revenue Service (IRS) requires annual returns from all taxpayers. A return helps ensure that someone has contributed an appropriate amount. Some people filing tax returns qualify for refunds because they overpaid their estimated taxes. Others may have taxes due.

Filing a final income tax return is an important part of estate administration. It allows a personal representative to determine how much the decedent may owe in income taxes. They can then use estate resources to fulfill those obligations. The failure to file an income tax return might lead to personal liability for the representative if they don’t pay the taxes on time and in full.

Income tax returns for the estate

Estate administration often stretches for a year or longer. The process involves not just going to court but also properly managing the resources of the decedent. The necessary steps might include liquidating certain estate resources. It is common for testators to leave instructions to hold an estate sale because their family members don’t want their personal property. If the sale of estate resources generates $600 or more in revenue, the estate has to pay income taxes.

The personal representative needs to file an income tax return for each year in which the estate generates revenue. They may need to file returns multiple years in a row. They should retain adequate capital from the sale of estate resources to ensure that they have enough funds on hand to cover the income tax obligations of the estate.

It can be difficult to understand and conform to the rules for taxes during probate proceedings. Personal representatives who seek legal guidance are less likely to make potentially costly mistakes than those managing the entire process on their own.