The role of executor and final tax obligations to the IRS

On Behalf of | Feb 9, 2023 | Estate Planning

One of the main responsibilities of an estate’s executor is paying off all legitimate debts and expenses of the deceased.

In addition to paying valid creditor claims, the personal representative is responsible for discharging final bills related to medical and funeral costs as well as expenses involved in administering the estate. He or she is also responsible for handling the deceased’s final tax returns.

What tax forms must the executor file?

After an individual dies, his or her estate becomes its own tax entity. As the estate’s personal representative, the executor has the task of filing any final forms with the IRS. These may include:

  • Form 1040, the deceased’s final U.S. Individual Income Tax return
  • One or more forms 1041, Income Tax Return for Estates and Trusts, which cover the estate’s taxable income
  • One or more U.S. Gift Tax Returns, which cover sizeable gifts the estate owner made before death
  • Form 706, a U.S. Estate Tax Return, which covers the value of the deceased’s gross estate

The executor may also have to file additional returns depending on the estate owner’s specific financial circumstances.

How does the executor pay final tax amounts?

Generally, the executor pays the deceased’s final taxes using assets from the estate itself. However, if the representative fails to submit complete, correct information to the IRS during the probate process, he or she may become personally responsible for any unpaid amounts.

Until the executor has paid or otherwise settled outstanding estate debts, including federal taxes, he or she cannot complete the probate process. This means that beneficiaries and heirs may not receive their distributions until the executor has taken care of final IRS obligations.