A "live and learn" tax tip

Many of you know my father died in 2009. He lived with us and I did the things for him he couldn't do for himself. I've done his taxes since 2003. Dad didn't have a large estate. Having just completed his taxes I'd like to pass along a lesson or two to anyone who wants it.

When someone dies their SS# is no longer valid after the date of death. It is incumbent on the executor to immediately apply to the IRS for a "EIN" number which will be used to, among other things, report on income and taxes after death. So, one has to file a 1040 and NC 400 for the period of the year Jan 1 till death (using the SS#) and another return (1041 and NC 407) for the period from death till the end of the year.

You might say...well, yeah, that's double the work, but so what? Here's the so what: Any income received after death is taxed using a far different tax table than used for the 1040 (or equivalent NC form). For example, the 1041 tax is 35% of anything over $11,500....and equally as steep getting to that amount. For example, the tax on $5000 (Fed and NC) would exceed $1200.00

How does one have income after death? An annuity payoff is one example. Interest on a bank account until the estate is administered/closed/distributed...and a myriad of other things. Had I known all this before I could have, with POA, caused the income to occur earlier and saved the estate a lot of money.

Just a word to those who might benefit...


Thanks Stan

That will most likely be very useful info in the future for me and my role with two octogenarians.