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What are an estate executor’s responsibilities toward the IRS?

One of the primary responsibilities of an estate executor, or personal representative, is paying off the deceased’s debts and final expenses.

In addition to discharging creditor debts, hospital and funeral bills and costs related to administering the estate, the executor must handle any last obligations to the Internal Revenue Service.

What tax forms must the representative file?

When an individual dies, the estate becomes liable for that person’s final federal income tax obligations. Additionally, the estate itself becomes its own tax entity. Forms that an executor may have to file with the IRS include:

  • The deceased’s final U.S. Individual Income Tax return, Form 1040
  • One or more Income Tax Return(s) for Estates and Trusts, Form 1041, which details the estate’s taxable income
  • A U.S. Estate Tax Return, Form 706, which details the value of the deceased’s gross estate
  • One or more U.S. Gift Tax Return(s), which detail any gifts the deceased made before death

Depending on the deceased’s specific financial circumstances, the representative may have to file additional returns.

How does the executor pay final tax obligations?

The personal representative generally pays the deceased’s final taxes from the estate’s assets. However, if an executor does not submit correct and complete information to the IRS during probate, he or she may become personally responsible for the estate’s unpaid taxes later.

A personal representative cannot close the probate process until the estate has paid or otherwise settled outstanding debts, including federal taxes. In cases where the IRS requires an estate tax return, an executor may not be able to make a final distribution to beneficiaries until closing the estate.