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IRS.gov Website
Publication 3
taxmap/pubs/p3-009.htm#en_us_publink1000176314

Forgiveness of Decedent's Tax Liability(p24)

rule
Tax liability can be forgiven if a member of the U.S. Armed Forces dies:
taxmap/pubs/p3-009.htm#en_us_publink100050004

What does tax forgiveness mean?(p24)

rule
When there is tax forgiveness, the following occurs. How Do I Make a Claim for Tax Forgiveness, later, provides details.
taxmap/pubs/p3-009.htm#en_us_publink1000176317

Combat Zone Related Forgiveness(p24)

rule
Combat zone related forgiveness occurs when an individual meets both of the following criteria.
  1. Is a member of the U.S. Armed Forces at death.
  2. Dies while in active service in a combat zone, or at any place from wounds, disease, or injury incurred while in active service in a combat zone.
Except as limited in Deadline for Filing a Claim for Tax Forgiveness, later, forgiveness applies to:
In addition, any unpaid taxes for years ending before the member began service in a combat zone will be forgiven and any of those taxes that are paid after the date of death will be refunded.
The beneficiary or trustee of the estate of a deceased servicemember does not have to pay tax on any amount received that would have been included (had the servicemember not died) in the deceased member's gross income for the year of death.
taxmap/pubs/p3-009.htm#en_us_publink1000176318

Service outside combat zone.(p25)

rule
These rules also apply to a member of the Armed Forces serving outside the combat zone if the service: For a description of combat zone, see Combat Zone Defined, earlier, under Combat Pay Exclusion.
taxmap/pubs/p3-009.htm#en_us_publink1000176321

Missing status.(p25)

rule
The date of death for a member of the Armed Forces who was in a missing status (missing in action or 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.
taxmap/pubs/p3-009.htm#en_us_publink1000176322

Terrorist or Military Action Related Forgiveness(p25)

rule
Terrorist or military action related forgiveness occurs when an individual meets both of the following criteria.
Except as limited in Deadline for Filing a Claim for Tax Forgiveness, later, forgiveness applies to:A terrorist or military action is any terrorist activity primarily directed against the United States or its allies or any military action involving the U.S. Armed Forces and resulting from violence or aggression against the United States or its allies (or threat thereof).
Any multinational force in which the United States participates is considered an ally of the United States.
The beneficiary or trustee of the estate of a deceased servicemember does not have to pay tax on any amount received that would have been included (had the servicemember not died) in the deceased member's gross income for the year of death.
taxmap/pubs/p3-009.htm#en_us_publink1000176323

Example.(p25)

Army Private John Kane died in 2016 of wounds incurred in a terrorist attack in 2015. His income tax liability is forgiven for all tax years from 2014 through 2016.
taxmap/pubs/p3-009.htm#en_us_publink1000176324

How Do I Make a Claim for Tax Forgiveness?(p25)

rule
taxmap/pubs/p3-009.htm#en_us_publink1000176325

How Is Tax Forgiveness Claimed?(p25)

rule
If the decedent's tax liability is forgiven, the personal representative should take the following steps.
taxmap/pubs/p3-009.htm#en_us_publink100050008

Step 1: File the proper form.(p25)

rule
The form filed to claim the tax forgiveness depends on whether a return has already been filed for the tax year.
taxmap/pubs/p3-009.htm#en_us_publink100050009

Step 2: Properly identify the return.(p25)

rule
Properly identify the return by providing the conflict or action on which the claim for tax forgiveness is based.
taxmap/pubs/p3-009.htm#en_us_publink100050010

Step 3: Include a Before and After Tax Forgiveness Computation.(p25)

rule
Include an attachment with a computation of the decedent's tax liability before any amount is forgiven and the amount that is to be forgiven. For computations when the decedent has filed joint returns or the spouse has filed as married filing separately, see below.
taxmap/pubs/p3-009.htm#en_us_publink100050006
Computation when the decedent filed joint returns.(p25)
Only the decedent's part of the joint income tax liability is eligible for the refund or tax forgiveness. To determine the decedent's part, the person filing the claim must:
  1. Figure the income tax for which the decedent would have been liable if a separate return had been filed,
  2. Figure the income tax for which the spouse would have been liable if a separate return had been filed, and
  3. Multiply the joint tax liability by a fraction. The top number of the fraction is the amount in (1) above. The bottom number of the fraction is the total of (1) and (2).
The amount in (3) is the decedent's tax liability that is eligible for the refund or tax forgiveness. If you are unable to complete this process, you should attach a statement of all income and deductions, indicating the part that belongs to each spouse. The IRS will determine the amount eligible for forgiveness.
taxmap/pubs/p3-009.htm#en_us_publink100050007
Computation when in a community property state.(p25)
If the decedent's legal residence was in a community property state and the spouse reported half the military pay on a separate return, the spouse can get a refund of taxes paid on his or her share of the pay for the years involved. The forgiveness of unpaid tax on the military pay also would apply to the half owed by the spouse for the years involved. See Community Property, earlier, for a discussion of community property.
taxmap/pubs/p3-009.htm#en_us_publink1000176327

Step 4: Provide Form 1310, if required.(p26)

rule
Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, must accompany the return unless the person filing the return is:
taxmap/pubs/p3-009.htm#en_us_publink100050012

Step 5: Provide the death certification. (p26)

rule
The death certification must come from the proper agency.
For military and civilian employees of the Department of Defense, certification must be made by the Department on DD Form 1300, Report Of Casualty.
For civilian employees of all other agencies who are killed overseas, certification must be a letter signed by the Director General of the Foreign Service, Department of State, or his or her delegate. The certification must include the deceased individual's name and social security number, the date of injury, the date of death, and a statement that the individual died as the result of a terrorist or military action. If the individual died as a result of a terrorist or military action outside the United States, the statement also must include the fact that the individual was a U.S. employee on the date of injury and on the date of death.
taxmap/pubs/p3-009.htm#en_us_publink100050097

Can I get more time to file if I don't have enough tax information by the deadline?(p26)

rule
If the death certification required in Step 5 earlier has been received but there is not enough tax information to file a timely claim for refund, file Form 1040X with Form 1310 by the deadline. Include a statement saying that an amended claim will be filed as soon as the necessary tax information is available. File the amended Form 1040X as soon as you get the needed tax information.
taxmap/pubs/p3-009.htm#en_us_publink100050180

Who Can File a Claim for Tax Forgiveness?(p26)

rule
If a member of the Armed Forces dies, a surviving spouse or personal representative handles duties such as filing any tax returns and claims for refund involving tax forgiveness. A personal representative can be an executor, administrator, or anyone who is in charge of the decedent's assets.
taxmap/pubs/p3-009.htm#en_us_publink1000176328

Deadline for Filing a Claim for Tax Forgiveness(p26)

rule
Whether a credit or refund is requested, generally, the period for filing the claim is 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. If the decedent's return was filed before it was due, it will be considered filed on the regular due date, usually April 15.
taxmap/pubs/p3-009.htm#en_us_publink100050095

Extension of deadline when the death is combat-zone related.(p26)

rule
If the death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the deadline for filing a claim for credit or refund is extended using the rules discussed later under Are There Filing, Tax Payment, and Other Extensions Specifically for Those in a Combat Zone or a Contingency Operation.
taxmap/pubs/p3-009.htm#en_us_publink1000176330

Where To File a Return Requesting Tax Forgiveness(p26)

rule
A return requesting tax forgiveness must be filed at the following address.

Internal Revenue Service
333 W. Pershing, Stop 6503, P5
Kansas City, MO 64108