Tax Obligations for Estate Executors

ions for Estate Executors

Tax Report

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The executor of an estate has many ongoing obligations, including filing applicable tax returns. On the federal level, nearly all estates must file a final income-tax return for the decedent. Additionally, the executor may need to file one or more federal incometax returns and an estate-tax return for the estate. (States have different filing requirements.)

Final Income-tax Return The executor has the responsibility for filing the final income-tax return (Form 1040). Because most individual taxpayers file on a calendar-year basis, the final tax year will typically cover the period from January 1 through the date of death. The final return is generally due on April 15 of the year following the date of death. An automatic six-month extension may be obtained by filing Form 4868 and paying any tax due with the extension.

The executor may file a joint incometax return with the decedent's surviving spouse, provided the spouse has not remarried by year-end. Filing jointly can offer certain tax advantages, but it may not be the best option in all cases.

Estate Income-tax Return Generally, the executor is required to file an income- tax return (Form 1041) for the estate for each tax year in which the estate has gross income of $600 or more. Because the decedent's final tax year ends on the date of death, the estate's first tax year begins the following day. The executor may elect to use a calendar or fiscal year. Careful consideration should be given to this decision because, in some cases, the executor may obtain additional tax deferral for a beneficiary by electing a fiscal year that ends after the close of the beneficiary's taxable year.

The Estate-tax Return Because the exclusion amount is quite high — $5.43 million for 2015 — many estates will not owe any federal estate tax. However, if the decedent was married, the executor may want to file an estatetax return anyway. The reason: The tax law allows a married person's executor to make an election to pass the deceased spouse's unused exclusion amount to the surviving spouse for eventual use on his/her own estate-tax return. Generally, this "portability" election must be made on a timely filed estate-tax return of the first spouse. Therefore, if there is any chance that the surviving spouse's entire estate (including the amount passed from the first spouse) will exceed his/her individual exclusion amount, the executor for the first spouse will want to file an estate-tax return to make the portability election.

New HSA Numbers The IRS recently announced the 2016 inflation-adjusted figures for health savings accounts (HSAs). Generally, HSAs are available to individuals who are covered by a. high-deductible health plan (HDHP) and are not covered by another plan.*

Contributions to HSAs are tax deductible (within inflationadjusted limits), and distributions are tax-exempt when used for qualifying out-ofpocket medical expenses (e.g., deductibles and co-payments, but generally not premiums) of the account holder and his/ her spouse and dependents.

For 2016, a qualifying HDHF's annual deductible must be at least 81,300 for self-only coverage or $2,600 for family coverage. Additionally, annual out-of-pocket expenses may not exceed $6,550 for self-only coverage or $13,100 for family coverage. The 2016 t 'taxi:mum HSA contribution limits are $3,350 for a person with selfonly coverage and $6,750 for a person with fantiTy coverage.

* Dental, vision, long-term care, and certain other types of coverage are permitted.

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