Important Changes

Combat zone.    Special rules apply 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. See Tax Forgiveness for Deaths Due to Military or Terrorist Actions, later. For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide.

Benefits for public safety officers' survivors.   For tax years beginning after 2001, a survivor annuity received by the spouse, former spouse, or child of a public safety officer killed in the line of duty generally will be excluded from the recipient's income regardless of the date of the officer's death. Survivor benefits received before 2002 were excludable only if the officer died after 1996. The provision applies to a chaplain killed in the line of duty after September 10, 2001. For more information, see Public safety officers, later.

Rollovers by surviving spouses.   For distributions after 2001, an employee's surviving spouse who receives an eligible rollover distribution may roll it over into an eligible retirement plan, including an IRA, a qualified plan, a section 403(b) annuity, or a section 457 plan. For plan distributions before 2002, surviving spouses could only roll the distribution over into an IRA.

Estate tax return.   Generally, if the decedent died during 2002, an estate tax return (Form 706) must be filed if the gross estate is more than $1,000,000.

Estate tax repeal.   The estate tax is repealed for decedents dying after 2009.

Important Reminders

Specified terrorist victim.    The Victims of Terrorism Tax Relief Act of 2001 is explained in Publication 3920, Tax Relief for Victims of 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.
• Debt cancellations made after September 10, 2001, and before January 1, 2002, if the debts were cancelled because an individual died as a result of the September 11 attacks or the anthrax attacks.
• Payments from the September 11th Victim Compensation Fund of 2001.

The Act also reduces the estate tax of individuals who die as a result of a terrorist attack.

Consistent treatment of estate and trust items.   Beneficiaries must generally treat estate items the same way on their individual returns as they are treated on the estate's return.

Individual taxpayer identification number (ITIN).   The IRS will issue an ITIN to a nonresident or resident alien who does not have and is not eligible to get a social security number (SSN). To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. It usually takes 4 to 6 weeks to get an ITIN.

An ITIN is for tax use only. It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U.S. law.

Photographs of missing children.   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication is designed to help those in charge of the property (estate) of an individual who has died (decedent). It shows them how to complete and file federal income tax returns and points out their responsibility to pay any taxes due.

A comprehensive example, using tax forms, is included near the end of this publication. Also included at the end of this publication are the following items.

• A checklist of the forms you may need and their due dates.
• A worksheet to reconcile amounts reported in the decedent's name on information Forms W-2, 1099-INT, 1099-DIV, etc. The worksheet will help you correctly determine the income to report on the decedent's final return and on the return for either the estate or a beneficiary.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

You can e-mail us while visiting our web site at www.irs.gov.

You can write to us at the following address:

Internal Revenue Service
Tax Forms and Publications
W:CAR:MP:FP
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

Useful Items You may want to see:

Publication

• 950   Introduction to Estate and Gift Taxes
• 3920   Tax Relief for Victims of Terrorist Attacks

Form (and Instructions)

• 1040   U.S. Individual Income Tax Return
• 1041   U.S. Income Tax Return for Estates and Trusts
• 706   United States Estate (and Generation-Skipping Transfer) Tax Return
• 1310   Statement of Person Claiming Refund Due a Deceased Taxpayer

See How To Get Tax Help near the end of this publication for information about getting publications and forms.

Personal Representative

A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve.

In general, an executor and an administrator perform the same duties and have the same responsibilities.

For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term executor includes anyone in actual or constructive possession of any property of the decedent. It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country.

A personal representative for a decedent's estate can be an executor, administrator, or anyone in charge of the decedent's property, so the term personal representative will be used throughout this publication.

Duties

The primary duties of a personal representative are to collect all the decedent's assets, pay the creditors, and distribute the remaining assets to the heirs or other beneficiaries.

The personal representative also must perform the following duties.

• File any income tax return and the estate tax return when due.
• Pay the tax determined up to the date of discharge from duties.

Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent.

Penalty.   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Reliance on an agent (attorney, accountant, etc.) is not reasonable cause for late filing. It is the personal representative's duty to file the returns for the decedent and the estate when due.

Identification number.   The first action you should take if you are the personal representative for the decedent is to apply for an employer identification number (EIN) for the estate. You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents that you file concerning the estate. You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. You must apply for the number using Form SS-4, Application for Employer Identification Number. Generally, if you apply by mail, it takes about 4 weeks to get your EIN. However, you can apply by phone and get it immediately. (You still need Form SS-4.) See the form instructions for how to apply.

Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. After a decedent's death, the Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. As the personal representative handling the estate you must furnish this identification number to the payer. For example, if interest is payable to the estate, the estate's EIN number must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. If the interest is payable to a surviving joint owner, the survivor's identification number must be provided to the payer and used to report the interest.

The deceased individual's identifying number must not be used to file an individual tax return after the decedent's final tax return. It also must not be used to make estimated tax payments for a tax year after the year of death.

Penalty.   If you do not include the EIN on any return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. You also are liable for a penalty if you do not give the EIN to another person, or if you do not include the taxpayer identification number of another person on a return, statement, or other document.

Notice of fiduciary relationship.   The term fiduciary means any person acting for another person. It applies to persons who have positions of trust on behalf of others. A personal representative for a decedent's estate is a fiduciary.

If you are appointed to act in any fiduciary capacity for another, you must file a written notice with the IRS stating this. Form 56, Notice Concerning Fiduciary Relationship, can be used for this purpose. The instructions and other requirements are given on the back of the form.

You should file the written notice (or Form 56) as soon as all of the necessary information (including the EIN) is available. It notifies the IRS that, as the fiduciary, you are assuming the powers, rights, duties, and privileges of the decedent, and allows the IRS to mail to you all tax notices concerning the person (or estate) you represent. The notice remains in effect until you notify the appropriate IRS office that your relationship to the estate has terminated.

Termination notice.   When you are relieved of your responsibilities as personal representative, you must advise the IRS office where you filed the written notice (or Form 56) either that the estate has been terminated or that your successor has been appointed. Use Form 56 for the termination notice by completing the appropriate part on the form. If another person has been appointed to succeed you as the personal representative, you should give the name and address of your successor.

Request for prompt assessment (charge) of tax.   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax that is due. However, as a personal representative you may request a prompt assessment of tax after the return has been filed. This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. This request can be made for any income tax return of the decedent and for the income tax return of the decedent's estate. This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries.

Form 4810.   Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), can be used for making this request. It must be filed separately from any other document. The request should be filed with the IRS office where the return was filed. If Form 4810 is not used, you must clearly indicate that you are making a request for prompt assessment under section 6501(d) of the Internal Revenue Code. You must identify the type of tax and the tax period for which the prompt assessment is requested.

As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. This applies even though the returns were filed before the decedent's death.

Failure to report income.   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax.

Request for discharge from personal liability for tax.   An executor can make a written request for discharge from personal liability for a decedent's income and gift taxes. The request must be made after the returns for those taxes are filed. It must clearly indicate that the request is for discharge from personal liability under section 6905 of the Internal Revenue Code. For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States.

Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period.

Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent that he or she still has any of the decedent's property.

Insolvent estate.   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due the United States must be paid first. Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due the United States. The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or had failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. The extent of such personal responsibility is the amount of any other payments made before paying the debts due the United States, except where such other debt paid has priority over the debts due the United States. The income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence.

Fees Received by Personal Representatives

All personal representatives must include in their gross income fees paid to them from an estate. If paid to a professional executor or administrator, self-employment tax also applies to such fees. For a nonprofessional executor or administrator (a person serving in such capacity in an isolated instance, such as a friend or relative of the decedent), self-employment tax only applies if a trade or business is included in the estate's assets, the executor actively participates in the business, and the fees are related to operation of the business.

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