05 Jul Do I need to pay estimated taxes for this estate account?

Q. I opened an estate account by cashing in Series EE bonds. Do I need to make an estimated tax payment for the interest the bonds earned to avoid penalties and interest? If yes, when do I need to make these estimated payments and on which IRS Form? Do I need to file Form 1041 by April 15, 2025?
— Executor

A. There are several items to tackle here.

Let’s get started.

When a person passes away, their 1040 personal income tax return passes with them, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

All income and deductions that existed up until the date of death are reported on their 1040, he said. Then, he said, all income and deductions after the date of death are reported on Form 1041 U.S. Income Tax Return for Estates and Trusts.

“The first thing an executor should do is open estate checking, savings and brokerage accounts,” Kiely said. “They should then transfer the amounts from the decedent’s accounts into the estate accounts.”

The exemption on an estate tax return is only $600. So, if the estate cashed in U.S. savings bonds, an estimated tax payment would be due for the quarter that the interest was paid, he said.

The estimated tax payments are due April 15, June 15, Sept. 15 and Jan. 15 of the subsequent year.

“Yes, you do need to file form 1041 by April 15 of the subsequent year,” he said.

The 2024 Form 1041 is available here.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published in July 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.