ESTATE TAX RETURN: Filing Estate Tax Return

estate tax return
CPA Canada

When someone dies, their estate must be handled, which often includes filing their final income tax or estate returns. It cannot be easy if this is your responsibility. Filing taxes requires concentration, which you may lack during an emotionally trying time. Furthermore, you may not know where to begin. However, understanding how estate tax returns work can help you navigate the process. Here’s a simple guide that covers everything you need to know about the requirements for filing an estate tax return before the due date, including when you should file an estate income tax return, what IRS forms, such as 706, may be required, who is responsible for filing them, and how to file.

This guide is only a starting point; please consult a tax professional for individual assistance filing.

What is an Estate Tax Return?

A decedent’s family would file an estate tax return upon the taxpayer’s return. An estate tax return, like an income tax return, is filed with the IRS. On the estate tax return, the family will outline all of the decedent’s assets and their values as of the date of death.

So, in essence, it’s a balance sheet that shows the decedent’s assets and values at the date of death. This includes real estate, bank accounts, stocks and bonds, closely held investments, insurance, retirement accounts, and anything else the decedent owned. The return would include tangible personal property as well.

When is it Necessary to File an Estate Tax Return?

An estate tax return due date is usually nine months after the decedent’s death. They, like other tax returns, may be automatically extended. Because it takes a long time to collect information and report, there is an automatic 6-month extension; it can and often is filed fifteen months after the date of death. If tax is due, it is due and payable after nine months, and failure to pay the tax within nine months; may result in the IRS levying penalties and interest.

Not every decedent is now required to file an estate tax return. Few people do. You must file a return only if your estate exceeds the applicable estate exemption in the year of death, which is $11.7 million in 2021. Prior lifetime gifts are also considered in the estate tax return. So, if someone gave away $5 million during their lifetime, that would have depleted some of their estate exemption, leaving them with only 6.7 million to shelter assets at death. So, if a person gives $5 million in lifetime gifts and dies with $7 million in assets, they are over the 11.7 thresholds and must file a return.

As previously stated, not everyone has that kind of wealth, and as a result, very few taxpayers in the United States file estate tax returns. In some cases, the surviving spouse may wish to file an estate tax return to make a portability election for the deceased spouse’s unused exemption.

Who is Entitled to File an Estate Tax Return?

If the deceased named someone executor of their estate in their will, that person is in charge of filing the estate tax return. If they die without a will, or if the executor is unable or unwilling to take on this responsibility, the state will appoint a personal representative or estate administrator.

Furthermore, if you are the surviving spouse, you may file a joint tax return with the deceased if you have not remarried before the end of the tax year. Someone who manages a descendant’s property may also be eligible to file the estate’s tax return.

Estate Tax Return Requirements

When someone dies, their assets are transferred to their estate. Any income generated by those assets becomes part of the estate and may trigger requirements for filing an estate income tax return. Savings accounts, CDs, stocks, bonds, mutual funds, and rental property are examples of assets that would generate income for the decedent’s estate.

General Requirements for Filing a Federal Estate Tax Return

Estate tax return requirements: US citizens and residents:

The executor must file Form 706 of the federal estate tax return for each U.S. citizen or resident’s estate:

  • Whose executor chooses to transfer the deceased spousal unused exclusion (DSUE) amount to the surviving spouse regardless of estate size; or
  • Whose gross estate, including adjusted taxable gifts and specific exemption, exceeds the federal basic exclusion amount applicable on the decedent’s death date.

Nonresidents of the United States who are not U.S. citizens

The executor must file Form 706-NA, the federal estate tax return. Suppose the date of death value of the decedent’s gross estate located in the United States (under federal IRC situs rules) exceeds the filing limit of $60,000. In that case, the filing limit is reduced by the sum of the gift tax-specific exemption applicable to certain gifts made in 1976 and the total taxable gifts made after 1976 that are not included in the gross estate.

Estate Tax Return Due Date

The estate tax return is typically due nine months after death. A six-month extension is available if requested before the estate tax return due date, and the estimated correct amount of tax is paid before the due date. The gift tax return is due on April 15, following the year of the gift.

Estate Tax Return 706

When someone dies, their assets are transferred to their estate. If the deceased person’s estate earned income after their death, such as interest on a bank account or dividends from investments, you might need to file a Form 1041 for estates and trusts. Form 1041 is only required if the estate’s annual gross income exceeds $600.

Estate Tax Returns you Might Need to File.

You may be required to file more than one type of estate tax return on behalf of your loved one. Let’s look at three types of federal estate tax returns that may be required.

Final Form 1040

Every U.S. taxpayer who files an annual tax return must fill out Form 1040. If your loved one earned money, you might be required to file this form. The amount of income earned and federal taxes withheld from the decedent’s paycheck determine whether you must file a final Form 1040 on their behalf.

This return is usually due on April 15 of each year, but the deadline this year is April 18, 2022. If you’re unsure whether you need to file this form on behalf of the deceased, consult the IRS’ Interactive Tax Assistant or a tax professional.

Form 1041

Form 1041 is an estate and trust income tax return. As previously stated, you must complete this form if the estate generates at least $600 in income, has taxable income, or a beneficiary is a nonresident alien.

The deadline for filing this form is determined by the estate tax year you choose: calendar or fiscal. If you select a calendar tax year, you must file this return by April 15 of the following year. If you choose a fiscal year, you can file the return up to 12 months after the descendant’s death date.

For example, if your loved one died on November 10, 2021, and you selected a fiscal year for the estate return, the deadline would be October 30.

Form 706 

Aside from regular income tax, the second type of tax can be imposed on certain estates. The estate tax, also known as the “death tax,” is levied on estates valued at $11.58 million or more.

If an estate is subject to estate tax, someone must file Form 706, a federal estate tax return, on behalf of the estate. The federal estate tax does not apply to the majority of estates. If you’re dealing with the tax affairs of a deceased person, you’ll most likely only need to deal with Forms 1040 and 1041.

Do I Need to File an Estate Tax Return?

When a loved one dies, taxes may be the last thing on your mind. However, filing a deceased person’s final tax returns may fall to a family member or friend. If you are in charge of someone who has died’s final affairs, you may be required to file an estate tax return on their behalf.

How to File an Estate Tax Return

The first step is gathering the deceased’s financial records and personal information, such as bank statements, retirement account statements, W-2s, and Social Security numbers. If you don’t know where to look for this information, consider submitting Form 4506-T to the IRS to request a transcript of their previous tax return.

Once you’ve gathered all of the required documents and information, you can use it to complete the deceased final Form 1040. If you’re filing a paper return, write “DECEASED” across the top of the form, followed by the descendant’s date of death and name.

Before you file Form 1041, you must apply for the estate’s tax identification number, also known as an employer identification number. You can file these returns by mail or online using tax software. Consider hiring a tax professional if you require assistance.


Filing estate tax returns can be challenging, especially if you are grieving the loss of a loved one. However, learning how the process works will better prepare you to handle this responsibility.

If your loved one earned income during the tax year, you’d almost certainly need to file Form 1040. In addition, if the estate generates $600 or more in income, earns taxable income, or has a nonresident alien beneficiary, you must file Form 1041. Form 706 of the estate tax return only applies to a few vast estates.

Estate Tax Return FAQs

What expenses can be taken on an estate tax return?

  • Funeral and burial costs.
  • Expenses for estate administration.
  • Unpaid debts left by the deceased
  • Donations to charities made after death
  • State inheritance tax and estate tax deductions

What assets are not subject to estate tax?

  • Whatever you leave to your surviving spouse.
  • You can leave any amount of money or property to a charity.
  • Gifts that are less than the annual exclusion amount for the year they were given.
  • Various types of trust assets

How is taxable income calculated for an estate?

To determine the estate tax base, add together the decedent’s taxable estate (the gross estate less allowable deductions) and the decedent’s adjusted taxable gifts.

Can you deduct funeral expenses on an estate tax return?

Individual taxpayers are not permitted to deduct funeral expenses on their tax returns. While the IRS allows medical expenses to be deducted, funeral expenses are not. Medical expenses that qualify must be used to prevent or treat a medical illness or condition.

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