The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. A surviving spouse, under certain circumstances, may have to file the returns for the decedent. See Joint Return, later. taxmap/pubs/p559-001.htm#en_us_publink100099501
If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. The return for that year will be a regular return and the personal representative must file it. taxmap/pubs/p559-001.htm#en_us_publink100099502
Samantha Smith died on March 21, 2008, before filing her 2007 tax return. Her personal representative must file her 2007 return by April 15, 2008. Her final tax return is due April 15, 2009.taxmap/pubs/p559-001.htm#en_us_publink100099503
The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Gross income usually is all income received by an individual in the form of money, goods, property, and services that is not tax-exempt. It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. In general, filing status depends on whether the decedent was considered single or married at the time of death. See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. taxmap/pubs/p559-001.htm#en_us_publink100099504
A return should be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not required to be filed. Also, the decedent may be entitled to other credits that result in a refund. These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. taxmap/pubs/p559-001.htm#en_us_publink100099505
Generally, a person who is filing a return for a decedent and claiming a refund must file Form 1310 with the return. However, if the person claiming the refund is a surviving spouse filing a joint return with the decedent, or a court-appointed or certified personal representative filing an original return for the decedent, Form 1310 is not needed. The personal representative must attach to the return a copy of the court certificate showing that he or she was appointed the personal representative.
If the personal representative is filing a claim for refund on Form 1040X, Amended U.S. Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write "Certificate Previously Filed" at the bottom of the form.taxmap/pubs/p559-001.htm#en_us_publink100099506
Mr. Green died before filing his tax return. You were appointed the personal representative for Mr. Green's estate, and you file his Form 1040 showing a refund due. You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative.
If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Return the joint-name check and a completed Form 1310 to your local IRS office or the service center where you mailed your return. A new check will be issued in your name and mailed to you.
When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Instead, keep it for your records and provide it if requested.taxmap/pubs/p559-001.htm#en_us_publink100099509
If the decedent was a nonresident alien who would have had to file Form 1040NR, U.S. Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. See the instructions for Form 1040NR for the filing requirements, due date, and where to file. taxmap/pubs/p559-001.htm#en_us_publink100099510
Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return.
A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. The filing status of the decedent in this instance is married filing a separate return.
For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information.taxmap/pubs/p559-001.htm#en_us_publink100099511
A court-appointed personal representative may revoke an election to file a joint return that was previously made by the surviving spouse alone. This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. taxmap/pubs/p559-001.htm#en_us_publink100099512
In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. For information on requesting this relief, see Publication 971, Innocent Spouse Relief.taxmap/pubs/p559-001.htm#en_us_publink100099513
The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. The method of accounting regularly used by the decedent before death also determines the income includible on the final return. This section explains how some types of income are reported on the final return.
For more information about accounting methods, see Publication 538, Accounting Periods and Methods.taxmap/pubs/p559-001.htm#en_us_publink100099514
If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included in the final return. taxmap/pubs/p559-001.htm#en_us_publink100099515
Interest from coupons on the decedent's bonds was constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Include the interest in the final return.
Generally, a dividend was constructively received if it was available for use by the decedent without restriction. If the corporation customarily mailed its dividend checks, the dividend was includible when received. If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Do not include the dividend in the final return. taxmap/pubs/p559-001.htm#en_us_publink100099516
Generally, under an accrual method of accounting, income is reported when earned.
If the decedent used an accrual method, only the income items normally accrued before death are included in the final return. taxmap/pubs/p559-001.htm#en_us_publink100099517
The death of a partner closes the partnership's tax year for that partner. Generally, it does not close the partnership's tax year for the remaining partners. The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year.
On the decedent's final return, include the decedent's distributive share of partnership items for the following periods.
- The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death).
- The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death.
Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. The partnership uses a tax year ending June 30. Mary died August 31, 2008, and her estate established its tax year through August 31.
The distributive share of partnership items based on the decedent's partnership interest is reported as follows.
- Final Return for the Decedent—January 1 through August 31, 2008, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2008, and (b) the partnership tax year beginning July 1, 2008, and ending August 31, 2008 (the date of death).
- Income Tax Return of the Estate—September 1, 2008, through August 31, 2009, includes XYZ partnership items for the period September 1, 2008, through June 30, 2009.
If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods.
- The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death).
- The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death.
Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. taxmap/pubs/p559-001.htm#en_us_publink100099521
If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. For more information, see Publication 555, Community Property.taxmap/pubs/p559-001.htm#en_us_publink100099522
A Form 1099 should be received for the decedent reporting interest and dividends earned before death and included on the decedent's final return. A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts.
For example, a Form 1099-INT reporting interest payable to the decedent may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report.
See U.S. savings bonds acquired from decedent under Income in Respect of the Decedent, later, for information on savings bond interest that may have to be reported on the final return.taxmap/pubs/p559-001.htm#en_us_publink100099523
If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule 1 (Form 1040A) or on Schedule B (Form 1040). Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Identify the amount of this adjustment as "Nominee Distribution" or other appropriate designation.
Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure.
Note. If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. See General Instructions for Forms 1099, 1098, 5498, and W-2G for more information on filing Forms 1099.
The treatment of a health savings account (HSA), an Archer MSA, or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. The estate tax deduction, discussed later, does not apply to this amount.
If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.taxmap/pubs/p559-001.htm#en_us_publink100099525
Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. The estate tax deduction, discussed later, does not apply to this amount. If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later.
The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education.
For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education.taxmap/pubs/p559-001.htm#en_us_publink100099526
Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider.
Generally, if the decedent received accelerated death benefits either on his or her own life or on the life of another person, those benefits are not included in the decedent's income. This exclusion applies only if the insured was a terminally or chronically ill individual. For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. taxmap/pubs/p559-001.htm#en_us_publink100099527
Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. This section contains a detailed discussion of medical expenses because, under certain conditions, the tax treatment can be different for the medical expenses of the decedent. See Medical Expenses, later. taxmap/pubs/p559-001.htm#en_us_publink100099528
You can claim the decedent's personal exemption on the final income tax return. If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. taxmap/pubs/p559-001.htm#en_us_publink100099529
If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. For information on the appropriate standard deduction, see the income tax return instructions or Publication 501. taxmap/pubs/p559-001.htm#en_us_publink100099530
Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. This includes expenses for the decedent, as well as for the decedent's spouse and dependents.
Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA.
Medical expenses that were not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred.
If you make the election, you can claim all or part of the expenses on the decedent's income tax return, if deductions are itemized, rather than on the federal estate tax return (Form 706). You can deduct expenses incurred in the year of death on the final income tax return. You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired.
The amount you can deduct on the income tax return is the amount above 7.5% of adjusted gross income. The amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. taxmap/pubs/p559-001.htm#en_us_publink100099533
You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. taxmap/pubs/p559-001.htm#en_us_publink100099534
Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Mr. Brown died on June 1, 2008, after incurring $800 in medical expenses. Of that amount, $500 was incurred in 2007 and $300 was incurred in 2008. Richard itemized his deductions when he filed his 2007 income tax return. The personal representative of the estate paid the entire $800 liability in August 2008.
The personal representative may file an amended return (Form 1040X) for 2007 claiming the $500 medical expense as a deduction, subject to the 7.5% limit. The $300 of expenses incurred in 2008 can be deducted on the final income tax return if deductions are itemized, subject to the 7.5% limit. The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. taxmap/pubs/p559-001.htm#en_us_publink100099535
If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. taxmap/pubs/p559-001.htm#en_us_publink100099536
Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. The reimbursements are also includible in the decedent's gross estate. taxmap/pubs/p559-001.htm#en_us_publink100099537
A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. A net operating loss on the decedent's final income tax return can be carried back to prior years. (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. taxmap/pubs/p559-001.htm#en_us_publink100099538
Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income.
These rules limit the deductible loss to the amount for which the individual was considered at risk in the activity. An individual generally will be considered at risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. An individual will be considered at risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. The individual is not considered at risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. For more information, see Publication 925, Passive Activity and At-Risk Rules. taxmap/pubs/p559-001.htm#en_us_publink100099539
A passive activity is any trade or business activity in which the taxpayer does not materially participate. To determine material participation, see Publication 925. Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements.
Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Passive activity losses or credits that are not allowed in one tax year can be carried forward to the next year.
If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. The portion of the losses that is equal to the excess is not allowed as a deduction for any tax year.
Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. For more information, see Publication 925.taxmap/pubs/p559-001.htm#en_us_publink100099540
This section includes brief discussions of some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments that are reported on the final return of a decedent.taxmap/pubs/p559-001.htm#en_us_publink100099541
You can claim on the final income tax return any tax credits that applied to the decedent before death. Some of these credits are discussed next.taxmap/pubs/p559-001.htm#en_us_publink100099542
If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. If the allowable credit is more than the tax liability for the year, the excess is refunded.
For more information, see Publication 596, Earned Income Credit (EIC).taxmap/pubs/p559-001.htm#en_us_publink100099543
This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. The decedent:
- Was a "qualified individual," and
- Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits.
For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled.taxmap/pubs/p559-001.htm#en_us_publink100099544
If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. For more information, see your income tax form instructions. taxmap/pubs/p559-001.htm#en_us_publink100099545
Depending upon when the adoption was finalized, this credit may be taken upon a decedent's final income tax return if the decedent:
- Adopted an eligible child and paid qualified adoption expenses or
- Has a carryforward of an adoption credit from a prior year.
Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. See Form 8839, Qualified Adoption Expenses, and its Instructions for more details.taxmap/pubs/p559-001.htm#en_us_publink100099546
The general business credit available to a taxpayer is limited. Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period.
After the carryforward period, a deduction may be allowed for any unused business credit. If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death.
For more information on the general business credit, see Publication 334, Tax Guide for Small Business. taxmap/pubs/p559-001.htm#en_us_publink100099547
Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040.taxmap/pubs/p559-001.htm#en_us_publink100099548
Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death.
- Net earnings from self-employment (excluding income described in (2)) were $400 or more.
- Wages from services performed as a church employee were $108.28 or more.
The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. The alternative minimum tax (AMT) was enacted so that certain taxpayers who benefit from these laws still pay at least a minimum amount of tax. In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. taxmap/pubs/p559-001.htm#en_us_publink100099550
Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. See the form instructions for information on when you must attach the form to the tax return.taxmap/pubs/p559-001.htm#en_us_publink100099551
If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts.taxmap/pubs/p559-001.htm#en_us_publink100099552
The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax, for example, are credits (advance payments of tax) that you must claim on the final return. taxmap/pubs/p559-001.htm#en_us_publink100099553
Write the word "DECEASED," the decedent's name, and the date of death across the top of the tax return. If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address space. If a joint return is not being filed, write the decedent's name in the name space and the personal representative's name and address in the remaining space. taxmap/pubs/p559-001.htm#en_us_publink100099554
You can check the "Yes" box in the Third Party Designee area of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. It also allows the designee to perform certain actions. See the income tax package for details.taxmap/pubs/p559-001.htm#en_us_publink100099555
If a personal representative has been appointed, that person must sign the return. If it is a joint return, the surviving spouse must also sign it. If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area "Filing as surviving spouse." If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as "personal representative." taxmap/pubs/p559-001.htm#en_us_publink100099556
If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the paid preparer's area of the return. See the income tax package for details.taxmap/pubs/p559-001.htm#en_us_publink100099557
The final income tax return is due at the same time the decedent's return would have been due had death not occurred. A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day.
The tax return must be prepared on a form for the year of death regardless of when during the year death occurred.
Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. A tax return for a decedent can be electronically filed. A personal representative may also obtain an income tax filing extension on behalf of a decedent. taxmap/pubs/p559-001.htm#en_us_publink100099558
Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut.taxmap/pubs/p559-001.htm#en_us_publink100099559
If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. For this purpose, a qualified hazardous duty area is treated as a combat zone.
If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded.
Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Also, if any tax was collected after the date of death, that amount will be credited or refunded.
The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. This is true even if death actually occurred earlier.
For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. taxmap/pubs/p559-001.htm#en_us_publink100099560
The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred:
- While a U.S. employee, and
- In a military or terrorist action.
The forgiveness applies to the tax year in which death occurred and for any prior tax year in the period beginning with the year before the year in which the wounds or injury occurred. taxmap/pubs/p559-001.htm#en_us_publink100099561
The income tax liability of a civilian employee of the United States who died in 2008 because of wounds incurred while a U.S. employee in a terrorist attack that occurred in 1998 will be forgiven for 2008 and for all prior tax years in the period 1997 through 2007. Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. taxmap/pubs/p559-001.htm#en_us_publink100099562
A military or terrorist action means the following.
- Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies.
- Any military action involving the U.S. Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression.
Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Military action does not include training exercises. Any multinational force in which the United States is participating is treated as an ally of the United States. taxmap/pubs/p559-001.htm#en_us_publink100099563
You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action.taxmap/pubs/p559-001.htm#en_us_publink100099564
The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years.
- The April 19, 1995, terrorist attack on the Alfred P. Murrah Federal Building (Oklahoma City).
- The September 11, 2001, terrorist attacks.
- The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002.
The Act also exempts from federal income tax the following types of income.
- Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack.
- Certain disability payments received in tax years ending after September 10, 2001 for injuries sustained in a terrorist attack.
- Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack.
- Payments from the September 11th Victim Compensation Fund 2001.
The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. taxmap/pubs/p559-001.htm#en_us_publink100099565
For astronauts who died in the line of duty after December 31, 2002, legislation extended the tax relief available under The Victims of Terrorism Tax Relief Act of 2001 (the Act). The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut rather than September 11, 2001).
For more information on the Act, see Publication 3920.taxmap/pubs/p559-001.htm#en_us_publink100099566
If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. If any tax is still due, it will be canceled. The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later.
If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by:
- The amount of time served in the combat zone (including any period in which the individual was in missing status), plus
- The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus
- The next 180 days.
Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years.
This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation.taxmap/pubs/p559-001.htm#en_us_publink100099567
Use the following procedures to file a claim.
- If a U.S. individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Form W-2, Wage and Tax Statement, must accompany all returns.
- If a U.S. individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. You must file a separate Form 1040X for each year in question.
You must file these returns and claims at the following address for regular mail (U.S. Postal Service).
Internal Revenue Service
P.O. Box 4053
Woburn, MA 01888
Identify all returns and claims for refund by writing "Iraq—KIA," "Enduring Freedom—KIA," "Kosovo Operation—KIA," "Desert Storm—KIA," or "Former Yugoslavia—KIA" in bold letters on the top of page 1 of the return or claim. On Forms 1040 and 1040X, write the same phrase on the line for total tax. If the individual was killed in a terrorist or military action, put "KITA" on the front of the return and on the line for total tax.
An attachment should include a computation of the decedent's tax liability and a computation of the amount that is to be forgiven. On joint returns, you must make an allocation of the tax as described below under Joint returns. If you cannot make a proper allocation, you should attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation.
You must attach Form 1310 to all returns and claims for refund. However, for exceptions to filing Form 1310, see Form 1310 under Refund, earlier.
You must also attach proof of death that includes a statement that the individual was a U.S. employee on the date of injury and on the date of death and died as the result of a military or terrorist action. For military and civilian employees of the Department of Defense, attach DD Form 1300. For other U.S. civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. For other U.S. civilian employees killed overseas, attach a certification from the Department of State.
If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information.taxmap/pubs/p559-001.htm#en_us_publink100099569
If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Determine the decedent's tax liability as follows.
- Figure the income tax for which the decedent would have been liable if a separate return had been filed.
- Figure the income tax for which the spouse would have been liable if a separate return had been filed.
- Multiply the joint tax liability by a fraction. The numerator of the fraction is the amount in (1), above. The denominator of the fraction is the total of (1) and (2).
The amount in (3) above is the decedent's tax liability that is eligible for forgiveness. taxmap/pubs/p559-001.htm#en_us_publink100099570
To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures.
- Write "DECEASED," the decedent's name, and the date of death across the top of the tax return.
- If a personal representative has been appointed, the personal representative must sign the return. If it is a joint return, the surviving spouse must also sign it.
- If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write "Filing as surviving spouse" in the area where you sign the return.
- If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as "personal representative."
- To claim a refund for the decedent, do the following.
- If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund.
- If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative.) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write "Certificate Previously Filed" at the bottom of Form 1310).
- If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310.