What Happens if a Deceased Person Owes Taxes?

The Internal Revenue Service (IRS) requires the executor of an estate to file a tax return on behalf of a deceased individual for the tax year in which the the person died. Any tax the decedent owes is paid out of the estate. Once the tax debt is satisfied, no further tax is due on behalf of the deceased.

An Estate Is Created

When a taxpayer dies, his assets become part of his estate. These assets include outstanding wages, retirement income, balances in bank accounts, dividends, interest, annuities and stocks. Personal property solely owned by the decedent can also be included as part of the estate. If the deceased taxpayer owes taxes, funds in his estate are used to pay off the existing debt.

Executor Is Determined

An executor is appointed to manage the estate. In most cases, the decedent's surviving spouse or children are legally granted the right to serve as executor of the estate. If there is a controversy over who the decedent's legal executor should be or if the decedent does not have an executor, the court will appoint one. The executor's responsibility is to ensure that the decedent's taxes are paid in full.

Tax Return Is Filed

The executor files a tax return on behalf of the deceased individual. If the decedent has a joint-filing surviving spouse, she must sign the tax return. If the decedent has an executor of the estate other than a surviving spouse, the executor must sign the return on behalf of the deceased. The IRS recommends writing the word "Deceased" and the date of death at the top of the tax return.

Tax Is Paid or Forgiven

If the deceased individual's tax return shows that he owes tax, the executor is responsible for ensuring that the tax is paid. For a spouse filing jointly, she can pay the tax when she files the tax return since the IRS allows her to file jointly in the year her spouse dies. If the decedent has no income in the estate to pay the tax or if the decedent died from injuries sustained while performing military service, the IRS usually forgives any owed tax. An executor is not responsible for paying the decedent's tax out of pocket if there is no money in the estate.

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