When you are named as the executor of an estate in Woodland Hills, one of the tasks that you are expected to oversee as part of the probate administration process is the filing of estate taxes. Fortunately, filing an estate tax return isn’t all that different from filing your own personal income tax return.
First and foremost, you should determine if you even need to file. If the estate has any money owed to it in unpaid wages, dividends or interests from financial accounts, or payments on real estate properties, and these payments total more than $600 per year, you must report them on an IRS Form 1041. Even if the estate doesn’t generate more than $600 in annual income, you may still have to file if any of the beneficiaries of the estate is a nonresident alien.
Just like with your own personal return, you’ll report the estate’s income, and you’ll also be able to claim deductions. All estates automatically qualify for a $600 deduction. Beyond that, some of the exemptions you are allowed to claim include:
- Fees paid to attorneys, tax professionals, and even yourself.
- Any assets distributed to beneficiaries during the tax year.
- Any and all expenses required to process the estate.
When it comes to determining the estate tax year, it follows the dates of your loved one’s death, and not the fiscal year. Thus, it begins on the exact date that he or she died, and you have up to 12 months to prepare taxes. Fortunately, according to the IRS, of the over 9,400 estate tax returns filed in 2012, California residents accounted for the most. Therefore, given the state’s high number of returns, you may expect to find plenty of resources for help in preparing your estate’s taxes.