When people typically think about the time after a loved one's passing, they know it can be difficult emotionally. That should be your first focus. However, there are also many complex financial realities that have to be addressed at some point, including the paying of taxes. It is important to know how this process works. Here are three common questions that people have:
Does the deceased still have to pay income tax?
Yes. Per the Internal Revenue Service (IRS), these taxes need to get paid "in the same manner as when they were alive." This means reporting any income the deceased made from their previous tax filing until the date of their death. That is still income that goes into their estate, and the estate then has to be used to pay the proper taxes. If taxes were removed from the person's paychecks, the estate may be due a tax refund.
Is the deceased still entitled to tax deductions?
Yes. The person who has passed away still gets all of the deductions and all of the credits that they could have claimed in life. For instance, if that person gave money to charity or could have taken a deduction for having a dependent living in the home with them, those things can still be claimed to reduce the taxes owed.
When do the deceased's taxes get paid?
The taxes needed to get paid as part of the probate process. It is important to do this before distributing assets to ensure that enough money remains to pay all that is owed. This could go beyond mere income taxes.
Again, it is crucial to know how the tax process works in relation to probate after someone's death. An attorney can help you understand what legal steps you need to take during the process.