My aunt lost her spouse in 2021. She has fixed annuity income which is listed as taxable IRA income. Her federal income tax filing status is single for 2022 which caused her standard deduction to drop resulting in a federal tax liability. Was checking if there was any other filing status for her as a widow and/or a way to reduce taxable income.

— J.B.S., email

Last week we explored a number of tax planning considerations for seniors prior to death. Today's column will examine potential tax action after a spouse or parent dies. What can be done in these post-mortem situations?  Somewhere Benjamin Franklin and/or Mark Twain are smiling because our effort focuses on what they termed "the two inevitables — death and taxes."

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After a spouse dies, what are the filing requirements? Usually, one of the first decisions made after death is to appoint a personal representative (or fiduciary) of a decedent's estate. This can be an executor, administrator, spouse or anyone who is in charge of the decedent's property. By the way, "decedent" is a legal description for a "dead gal or guy."

Filing status for the year of death. For the period the decedent was alive during his/her year of passing, their income is part of a joint return with their spouse … unless the spouse remarries during that year. For example, the husband dies in February 2022 and the spouse remarries in November 2022. The spouse can file a joint return with her new husband, while the deceased spouse’s personal representative will file the last return using the Married Filing Separately provisions.

Important points when filing the return for the year of death. When e-filing, follow the directions provided by the software for correct signature and notation. For paper returns, the filer writes “deceased,” the deceased person's name and the date of death across the top of page 1 of the tax return. Who signs the return? Any appointed representative will sign the return. If it's a joint return, the surviving spouse will also sign the return. If there isn't an appointed representative, the surviving spouse will sign the return and write, "filing as surviving spouse." If there is no appointed representative and no surviving spouse, the person in charge of the deceased person's property will file and sign as "personal representative."

Document Do and Don't List  

DO attach a copy of the court document showing an appointment if you are the court-appointed representative.

DO include Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer to claim a refund if there is no surviving spouse or court-appointed representative.

DON'T send the IRS a copy of the death certificate of other proof of death.

Filing status the year after death. Finally addressing JBS' question, unfortunately, the surviving spouse's options are limited in the after-death filing. The best option, if you qualify, is “surviving spouse" filing status for two years following the year of your spouse's death. For example, if your spouse died in 2021 and you haven't remarried, you will be eligible for this filing status in 2022 and 2023. This filing entitles you to use joint return tax tables and, if you are not itemizing deductions, the highest standard deduction amount. To qualify as a surviving spouse, you must have qualified to file "married filing jointly" with your spouse for the year he or she died. Also, you didn't remarry. You must have a child, stepchild or adopted child you claim as your dependent and paid for more than half of the cost of maintaining a home that is also the home of said dependent child. Note: the surviving spouse provisions do not apply to a foster child as the dependent. However, that fact pattern would likely qualify the taxpayer for "head of household" filing status.

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If you don't meet the surviving spouse or head of household criteria explained above, your filing status is single. As a single taxpayer, you will encounter a "double whammy" in the form of a higher federal tax rate structure and a lower standard deduction. In such situations, we recommend doing a deep dive into your records for possible deductions (e.g., delayed billing of medical expenses that allow you to itemize) and credits specifically targeted for seniors (e.g., Credit for the Elderly or Disabled) or in some cases, the Earned Income Credit. It often comes as a surprise to the newly widowed taxpayer that even though his/her income didn't change, their filing is mandated and they may owe taxes because they have to use the "single" provisions.

Other Postmortem Considerations

• Life insurance proceeds are typically excluded from income.

• If the decedent has a continuing income stream after death (e.g., rental property owned in the decedent's name only), an estate income tax return must be filed until the estate is settled.

• After filing the above tax returns that include the decedent, consider completion after each return a separate IRS Form 4810, Request for Prompt Assessment Under Internal Revenue Code 6501(d). Such action can cut in half (from 36 months to 18 months) the time the IRS has to review and adjudicate a particular filing.

• Very infrequently, an estate income tax return showing a tax liability (IRS Form 706) may be due if the estate exceeds $12,060,000 (for 2022) or $12,920,000 (for 2023). Only about 2% of estates pay any tax when completing Form 706.

Rick Klee served as the tax director at the University of Notre Dame from 1998 through August 2019. A retired CPA, Klee is a graduate of Notre Dame. You can contact him at rklee@nd.edu.

Ken Milani is a professor of accountancy at Notre Dame where he served as the faculty coordinator of the Notre Dame Tax Assistance Program. Contact him at milani.1@nd.edu.

E-mail questions to either.

This article originally appeared on South Bend Tribune: Filing taxes in post-mortem situations