Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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Filing a final Form 1040 tax return after someone dies is crucial for several important reasons: 

WRITE FINAL RETURN AT THE TOP IN BOLD RED AND ATTACH A COPY OF THE DEATH CERTIFICATE.

One reason for doing so is to prevent a false tax return being filed in the name of a deceased person.

Filing a fraudulent 1040 tax return for a deceased person to claim a fraudulent refund is a known form of identity theft and tax fraud, though the extent of the scam is difficult to quantify precisely. While it’s not the most common type of tax fraud, it does occur and can have significant consequences for both the IRS and the deceased person’s family.  The adult children of the Decedent will be the prime suspects in any fraudulent tax return filing after death because they are the Beneficiaries with the most access to the necessary information.

Unfortunately, there is a factual basis for suspicion of adult children.

While exact statistics on how often adult children steal from their parents after they die are difficult to come by due to underreporting and the difficulty of detection, the information available indicates it is a significant concern:

• Elder Financial Abuse by Family Members: Studies show that family members, especially adult children, are frequently involved in elder financial abuse, which can extend to exploiting estates after death.
• Estate Fraud and Inheritance Theft: Inheritance theft, including manipulation of wills, outright theft, and embezzlement by executors or trustees, is acknowledged as a concerning issue that often goes unreported.
• “Inside Jobs”: The majority of inheritance-related fraud is committed by people close to the victim, often family members, who abuse trust or authority.
• Motivation: Perpetrators, including adult children, may feel entitled to assets or justified in taking an “advance” on their inheritance. They may also fear that the inheritance will be depleted by the parent’s expenses or seek payback for past grievances. 

Important Considerations:

• Underreporting: Elder financial abuse is highly underreported, with estimates suggesting that only a small fraction of cases are ever reported. This makes it difficult to get accurate statistics.
• Difficult to Detect: Inheritance theft can be subtle and difficult to detect, especially when it involves manipulating the victim or mismanaging the estate.
• Vulnerability: Elderly individuals are often vulnerable to financial exploitation due to factors like isolation, health issues, and dependence on caregivers, making them easier targets for abuse. 

In summary, while there’s no precise figure on how often adult children steal from their parents after death, the evidence strongly suggests it is not uncommon and is a significant concern related to broader issues of elder financial abuse and inheritance theft. A 1998 study found that 60% of substantiated Adult Protective Services cases of financial abuse involved an adult child. 

The following points summarize the issue:

• IRS Detection: The IRS has implemented measures to detect and prevent this fraud, including locking deceased individuals’ accounts to prevent the use of their Social Security numbers for fraudulent filings.
• Prevented Fraud: The IRS has reported preventing and recovering billions of dollars in potentially fraudulent refunds related to identity theft and deceased individuals’ information.
• Cases of Fraud: Instances of this type of fraud still occur despite preventative measures. For example, a Forbes article reported that the IRS processed and paid out millions in fraudulent refunds using the identities of thousands of deceased individuals in 2011.
• Government Efforts: The government is working to improve data sharing between agencies like the IRS and the Social Security Administration to reduce fraud and prevent improper payments to deceased individuals.
• Protecting Against the Scam: Families can help protect against this scam by notifying the IRS and SSA of a death as soon as possible and taking steps to secure the deceased person’s financial information. 

In summary, filing a fraudulent tax return for a deceased person is a real issue, though it is not the most widespread type of tax fraud. The IRS and other agencies are working to combat it, and individuals can take steps to help prevent it.

1. Settling Tax Obligations:

• Reporting Income: The final IRS Form 1040 Individual Income Tax Return Return reports all income the deceased person earned from the start of the tax year up to the date of their death.

• Determining Tax Liability: This return determines if any taxes are owed to the IRS for that period.
• Paying Outstanding Taxes:  If taxes are due, the estate is responsible for paying them using the decedent’s assets. 
• WARNING: IF THE ESTATE ADMINISTRATOR DOES NOT PAY TAXES OWED TO THE IRS BY THE DECEDENT, THEN THE ADMINISTRATOR MAY BE HELD LIABLE FOR THE TAXES.

2. Claiming Refunds:

• Receiving Refunds: If the deceased person is due a tax refund, the final 1040 is necessary to claim it.
• Form 1310: If you’re claiming a refund and are not the surviving spouse or a court-appointed representative, you’ll need to file IRS Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. 

3. Estate Administration:

• Probate Process: Filing the final tax return is often a necessary step in the probate process, which is the legal procedure for settling the estate and distributing assets.
• Satisfying Creditors: The final tax return helps ensure that the IRS is paid before the estate’s assets are distributed to heirs and beneficiaries. 

4. Avoiding Penalties and Interest:

• IRS Notices and Actions: If a final tax return is not filed, the IRS may send notices and eventually pursue collection actions, including liens on the estate.

5. Proper Accounting and Reporting:

• Accurate Information: The final return provides the IRS with accurate information about the deceased person’s financial situation at the time of their death.
• Estate Income: Any income earned by the estate after the date of death will need to be reported on a separate tax return (Form 1041, U.S. Income Tax Return for Estates and Trusts). 

In essence, filing the final 1040 tax return after death is a critical responsibility to ensure that the deceased person’s tax affairs are properly concluded, and to avoid potential complications for the estate and the personal representative.

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Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary.  Just email me an image of your photo ID.