What You Should Know About Tax Filings for an Estate in Arizona
1. Is a Tax ID number required?
Yes, most likely, in order to report any income earned by the estate or trust after the deceased person’s date of death. The person responsible for administering the estate will need to apply for a taxpayer identification number (aka employer identification number). The number is provided to financial institutions that need it to process transactions and report income to the estate. A financial institution will ask for the estate’s tax ID number prior to opening an account in the name of the estate.
Similarly, if a living trust is used to administer the estate, the trustee may need to apply for a taxpayer identification number on behalf of the trust.
2. What federal income tax returns are required?
If there is a surviving spouse, he or she can file a final joint federal income tax return. If not, the person responsible for administering the estate must file a final Form 1040 for income attributed to the deceased person prior to death. Even if not otherwise required because there was not enough income, a final return is recommended so the IRS knows not to expect any more returns.
Any person other than the surviving spouse who submits tax returns on behalf of a deceased person should file Form 56, “Notice Concerning Fiduciary Relationship.” This notifies the IRS of the death and lets the IRS know who has authority to submit tax returns.
A Form 1041 may need to be filed annually to report any income attributed to the deceased person’s estate after death. An accountant experienced with fiduciary returns can do this.
3. What Arizona income tax returns are required?
The filings are similar, except the Arizona tax returns are Form 140 and 141 respectively. The responsible person should also file Form 210, “Notice of Assumption of Fiduciary Duties.”
4. What about the estate tax?
For persons dying in 2023, up to $12.92 million may be transferred free of tax using the applicable estate tax exemption. The exemption amount adjusts annually for inflation. Assets above the exempt amount are taxed at rates up to 40%. The only exceptions are transfers to a surviving spouse or qualified charitable organization, which receive an unlimited exemption. It is not necessary to file an estate tax return for non-taxable estates.
The Arizona estate tax was repealed in 2006.
5. What is a Tax Release?
The estate may need to obtain a certificate from the Arizona Department of Revenue showing that no income tax is due. This is usually required in formal probates, but also recommended for any other estate settlement when the assets are substantial, or if you just want to be extra cautious. Technically, the tax release certificate should be filed with the court at the same time as the final accounting. Arizona law requires a certificate if all of the following are true:
If needed, the personal representative should request the tax release certificate when filing the final income tax return for the estate. The certificate request should be mailed to: Arizona Department of Revenue, 1600 W. Monroe, Room 610, Phoenix, AZ 85007. The department must be in possession of Form 210 to issue the certificate. Also, upon request by the department, the personal representative must submit a copy of the will or trust document when the estate’s gross income is $5,000 or more.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.
Yes, most likely, in order to report any income earned by the estate or trust after the deceased person’s date of death. The person responsible for administering the estate will need to apply for a taxpayer identification number (aka employer identification number). The number is provided to financial institutions that need it to process transactions and report income to the estate. A financial institution will ask for the estate’s tax ID number prior to opening an account in the name of the estate.
Similarly, if a living trust is used to administer the estate, the trustee may need to apply for a taxpayer identification number on behalf of the trust.
2. What federal income tax returns are required?
If there is a surviving spouse, he or she can file a final joint federal income tax return. If not, the person responsible for administering the estate must file a final Form 1040 for income attributed to the deceased person prior to death. Even if not otherwise required because there was not enough income, a final return is recommended so the IRS knows not to expect any more returns.
Any person other than the surviving spouse who submits tax returns on behalf of a deceased person should file Form 56, “Notice Concerning Fiduciary Relationship.” This notifies the IRS of the death and lets the IRS know who has authority to submit tax returns.
A Form 1041 may need to be filed annually to report any income attributed to the deceased person’s estate after death. An accountant experienced with fiduciary returns can do this.
3. What Arizona income tax returns are required?
The filings are similar, except the Arizona tax returns are Form 140 and 141 respectively. The responsible person should also file Form 210, “Notice of Assumption of Fiduciary Duties.”
4. What about the estate tax?
For persons dying in 2023, up to $12.92 million may be transferred free of tax using the applicable estate tax exemption. The exemption amount adjusts annually for inflation. Assets above the exempt amount are taxed at rates up to 40%. The only exceptions are transfers to a surviving spouse or qualified charitable organization, which receive an unlimited exemption. It is not necessary to file an estate tax return for non-taxable estates.
The Arizona estate tax was repealed in 2006.
5. What is a Tax Release?
The estate may need to obtain a certificate from the Arizona Department of Revenue showing that no income tax is due. This is usually required in formal probates, but also recommended for any other estate settlement when the assets are substantial, or if you just want to be extra cautious. Technically, the tax release certificate should be filed with the court at the same time as the final accounting. Arizona law requires a certificate if all of the following are true:
- The estate is subject to probate.
- The value of the estate exceeds $20,000 at time of death.
- The estate has a beneficiary that is not an Arizona resident.
If needed, the personal representative should request the tax release certificate when filing the final income tax return for the estate. The certificate request should be mailed to: Arizona Department of Revenue, 1600 W. Monroe, Room 610, Phoenix, AZ 85007. The department must be in possession of Form 210 to issue the certificate. Also, upon request by the department, the personal representative must submit a copy of the will or trust document when the estate’s gross income is $5,000 or more.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate settlement, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is author of the Arizona Estate Administration Answer Book and a prominent member of Wealth Counsel, LLC, the nation’s premiere organization of estate planning attorneys.