Nothing is certain except death and taxes—and the headaches that result when the two intersect. Rarely do people die with their finances neatly tied up, and one of the frequent issues that arises is the matter of the deceased person’s (decedent’s) last income tax refund.
If a person dies being owed an income tax refund (as thousands of people do every year), what happens to the money? Obviously, the decedent cannot cash a check made out to him or her. A refund in the sole name of the decedent is an asset of the decedent’s estate. Eventually, it will be distributed to the decedent’s heirs or beneficiaries (assuming there is money left in the estate after all legitimate debts are paid). But what happens in the meantime? And what if the tax refund is from a tax return jointly filed with a spouse?
When one spouse has died, the surviving spouse can file a joint income tax return for the tax year in which the deceased spouse died. The surviving spouse needs to indicate on the tax return that their spouse is deceased. According to the Internal Revenue Service, the surviving spouse should write this notation above the area on the return where the address is entered. The notation should state the word “DECEASED,” the deceased spouse’s name, and the date of death.
If the surviving spouse is filing a joint income tax return, but no personal representative has yet been appointed for the decedent’s estate, the survivor should sign the return in their own name. In the signature area below their signature, they should again sign and print “filing as surviving spouse.”
If a personal representative has been appointed in the decedent’s probate matter, the personal representative should sign the return together with the surviving spouse. The address of the surviving spouse and the decedent’s last address must, of course, also be on the return.
Of course, many people file their income tax returns electronically these days, and this is still possible in the case of a joint return with a deceased spouse. Tax preparation software typically prompts a user to indicate whether the spouse is deceased and then directs the user accordingly regarding notation and signature requirements.
It’s not terribly common, but what happens if the surviving spouse remarries before the end of the year in which the deceased spouse died? In that case, the surviving spouse may not file a joint income tax return with the deceased spouse. Instead, whoever files the return on behalf of the deceased spouse would do so under the filing status “married, filing separately.”
If the deceased taxpayer was not married, the personal representative of their estate (if there is one) should file the income tax return. If a personal representative has not been appointed, a survivor of the deceased can file, noting on the return that the taxpayer is deceased.
If a tax refund is due to a deceased taxpayer, there may be another step to take. The person filing the income tax return should also file IRS Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer.
The Internal Revenue Service does not require surviving spouses to file Form 1310 in order to receive the tax refund, many tax preparers recommend filing it anyway. The form does have a box to check if the filer is a surviving spouse, and filing the form could help to prevent delays in processing the refund. Also, if a surviving spouse has received a refund check made out jointly to the surviving spouse and the deceased spouse, the survivor can return the check along with Form 1310. A new check will be issued in the name of the surviving spouse.
The form is brief, and requires filers to disclose whether the decedent left a will; whether a personal representative has been appointed in the decedent’s estate, and if not, whether one is going to be appointed.
Form 1310 also asks the person completing the form to indicate whether they intend to pay out the tax refund according to the laws of the state where the decedent was a legal resident. If the person filing the form answers “no” to that question, a refund cannot be issued until the filer presents a court certificate showing that they have been appointed personal representative of the estate, or other documentation that they are entitled under state law to receive the refund.
If you are a surviving spouse or the personal representative of an estate and have questions about the decedent’s income tax filings or tax refund, contact a probate attorney experience in tax law to schedule a consultation. Death and taxes are certain. What to do after a death may not be. An attorney can help.