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"Death and taxes may be equally inevitable, but the taxman demands the last word. Death does not excuse a final accounting with the IRS. In fact, taxes can further complicate the lives of survivors. Depending on when the death occurred, federal estate taxes may be due, and state inheritance taxes could come into play as well. Our focus here will be on federal income taxes."
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Another point is that the last pension and/or Social Security check may have to be returned, depending on when the the person dies. Before my father passed away, he left explicit instructions on what needed to be done, step by step, including paying his taxes. From informing SS of his death, getting certified copies of death certificates, to letting us know that he wanted to be cremated. He told us what savings accts etc that he had, their acct numbers, and even the combination to his safe. Everything was laid out so clearly, that we weren't stressed about what to do next or what his wishes were. We had more time to grieve with each other and remember him well. It was such a huge burden off my shoulders that I have done the same thing for my son. All that info is now tucked inside my will --in the same safe I found my father's info and will. It's one of the greatest gifts you can leave your family.
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GrandpaHiker, Besides the fact that I love your name on this site, I also appreciate the way you answered this question. I would give you 5 thumbs up if allowed! Thank you for sharing the resource and the first paragraph. Great answer!!

Handling this now for my dear mom who passed away several months ago. It is so important for caregivers to help the ones they care for to understand that the tax man has the last word and how to be accountable for that so others are not left with a bundle of challenges.

I'm also learning how to be accountable for myself, so my grown children will not be burdened with my 'stuff' after I'm gone. It starts now... we should all know the many complicated and ever changing answers to this question.
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I am always amazed at the type of question that asks if a deceased person must "pay taxes". There is only one way that the Internal Revenue Service may collect taxes on a deceased person, and that is to attempt to collect funds from the deceased person's estate. Exceptions: If the decedent previously filed Returns that used the filing status of Married Filing Jointly, then the remaining spouse is responsible for payment of any taxes due....for the year of death only....to be paid by April 15th of the following year. This has nothing to do with Social Security checks, Pensions, IRA's ( unless it's an Inherited IRA).
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Yes the estate is supposed to pay the taxes, but it is the legal responsibility of the executor of the estate to pay all outstanding debts before settling the estate. If there are any funds remaining after death (savings, checking, CDs, house, etc) all debts must be settled before any distributions can be made to family etc. . At least in my state.
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Thanks ejunicorn...I was wrong in one sense and I didn't know it. But like you said, if money or property is in a trust, then taxes will be paid.
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Yes, felicitym, good point to bring up! Also, pension checks. If the monthly check arrived, let's say, on the 1st and the person dies the next day, they might owe back the remaining days of the month. I say "might" because it would depend upon whether the check is for the month passed or the month ahead (I think pensions are typically paid for the coming month). Especially if a parent has left very little money, be careful not to spend anything that has to be given back (if it would be a burden to return it).
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Income Tax? If the person was allive even one day in a year, taxes will have to be filed for that year (the next year).
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FelicityM: You are partially WRONG. It is the duty of the executor, executrix, or personal respresentative of a deceased person to: 1) File an Exemption of EstateTaxes. This is a brief statement showing that deceased estate is worth less than $5,000,000 (2012), or $1,000,000. (2013). 2) File a Notice To Debtors and Creditors at the County Courthouse where the deceased was domiciled. Creditors have 90 days to respond to the Courthouse in order to collect debts owed to them. Some counties require a 120-day response time and some only 60 days. NO BILLS SHOULD BE PAID UNTIL THE RESPONSE TIME HAS EXPIRED. Debtors who did not respond should be ignored. No debts should be paid by the executor unless directed to do so. Some wills prepared by lawyers for the deceased will direct the executor NOT TO PAY ANY CREDIT CARD BILLS, unless held jointly with another person, such as a spouse. Let them sue the estate, but they will not be able to collect. Distributions to beneficiaries should take place as soon a possible after the 90 day period has expired.
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Correction: It should read: Creditors who did not respond should be ignored.
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