When Taxes Are Due
The Executor is responsible for paying these taxes by April 15 of the year after the year in which the deceased died. Depending on how close to that date the person died, you may be able to get an extension. If you're interested in trying to get an extension, it's a good idea to talk to an accountant, who may be able to help you.
How Much Will You Have To Pay In Taxes?
Because everyone's estate is different, it is hard to give general advice for how to pay taxes on behalf of an estate or a person who died. In addition, there are different taxes that must be paid on income the person who died received during the year of death while he or she was alive, and income, earnings, or savings that the estate has accrued after the death. There are also specific rules for different types of investments or assets, and different ways that survivors may choose to report deductions and file a final tax return. If you are the Executor or administrator of an estate, it may be best to contact a local accountant to help you make sense of the situation.
Understanding The Federal Estate Tax
The federal estate tax rate is at 40% for the year 2016, with an exemption of $5.45 million. This means that if the estate is valued at less than $5 million, the estate will not have to pay any federal taxes on those assets, and heirs will receive those assets in their entirety. If the estate is valued at more than $5 million, all assets above $5 million will be taxed at 40%, meaning that heirs will get the $5 million tax-free and will get 60% of all assets above $5 million. That said, the estate tax is not the only tax that may need to be paid. Since there are a number of other tax issues to consider when settling an estate, it's generally a good idea to work with an accountant to determine the amount and types of taxes you'll need to pay. [Related: State-By-State Estate And Inheritance Tax Rates]
Working With An Accountant
Filing taxes can be incredibly complicated, confusing, and frustrating. Hiring an accountant can make this process much easier. An accountant can help you file tax returns on behalf of the person who died and the estate, and can also help you file your own tax returns, which may be complicated if you inherited any of the deceased's estate.