My mother died in November 2011. My father's been dead for 13 years. April 15 is coming and I have no idea what to do (or if I should) file federal and/or state income taxes for my mother. She lived in a NH for all of 2011 until she died and her money was spent down on the monthly rent, but there was some money left when she died, which went to me, POD. There was no real estate.
My husband has always done our taxes and, for the past 5 years, my mother's. He's getting nervous about doing hers this year but we don't want to go to H&R Block or anything. I'm hoping it will be fairly simple. Do we need a special form? Her money did generate some interest, so if she actually owes taxes, do we have to pay it?
Any advice or information is very much appreciated. We're in NJ.
Thank you
As Executrix, or Personal Representative as it's now known in some states, you would hire a real estate or elder law attorney to prepare and record the deed to transfer title from your father to (a) the 3 daughters or (b) your 2 sisters.
Expenses and income for the year in which this occurs would be prorated based on the date either of the transfer deed or the recording of it. I'm not sure of this, i.e., which date would govern. You'd have to ask the attorney who prepares the deed.
However, if your sisters want to retain the house and not sell it, the issue arises of what happens to your 1/3 interest. This is where it can get tricky:
1. If you want to remain a 1/3 interest holder, then the proceeds from renting all the units should be split between the 3 of you. And you each report that 1/3 income on your individual tax returns, as well as take 1/3 of the expenses.
And don't forget that it's rental income and needs to be treated as such on your income tax returns.
However, I'm assuming that the sisters aren't paying rent to themselves and you as owners. So some equitable arrangement needs to be reached to compensate you for your 1/3 share.
2. If you don't want to remain a fee holder, you should be paid your 1/3 share, and title transferred to the 2 sisters jointly. Then they only (not you) report the income from the rental units as well as the expenses, on their tax returns.
Whether there are 2 or 3 feeholders, each would contribute a proportionate share of the expenses of the house and pay an equally proportionate share of the taxes (and other maintenance such as Rental insurance coverage for the tenants, upkeep, property taxes, etc.). (And coincidentally, liability would be split among the owners, whether 2 or 3 sisters.)
But if the 4 family house was your father's only asset, once title is transferred to the 2 sisters or you and them, there shouldn't be a need for tax filings on his behalf after the year in which the transfer took place. There's no reason to keep his estate open once disposition of the house is made, unless there are other assets of which to dispose.
This thread is several years old. You might get more responses if you posted your question as a new thread.
Who was the executor of the estate? They should have seen that the taxes were filed for the year that your mother died. Ask the executor to make sure the taxes were filed.
Any good CPA is a better risk to use for preparing your return! They have professional standards and licensing to maintain. Most CPA's are qualified to prepare most individual 1040s. They tend to understand the language of the IRS, too. H&R Block makes plenty of mistakes...don't assume.