What has to be filed, when, and the few decisions that are expensive to get wrong.
Losing someone is hard enough without the paperwork. The tax side is more orderly than it looks: a final return for the person, sometimes a return for the estate, and some rules about what the people left behind inherit. Most deadlines are months away. We can handle all of it for you; this page is so you know what is coming.
Current as of October 2026 · Figures are for tax year 2026
One more Form 1040 for the person, covering January 1 through the date of death, due April 15 of the following year. Then, until the last asset is distributed, the estate is a taxpayer of its own.
The final return reports the income the person received while alive, up to the date of death. It is prepared like every other year, with “deceased” and the date of death at the top. The full standard deduction is allowed even if the person died in January.
A surviving spouse can file jointly for the year of death and sign for both. Otherwise the court-appointed representative signs, or, with no appointment, the person handling the affairs.
Two small forms go with it when they apply. Form 1310 lets someone other than a spouse or court-appointed representative claim a refund due to the person who died; without it the IRS has no one to send the check to. Form 56 tells the IRS who the fiduciary is, so notices come to the right address instead of to a house that is being sold.
Income that arrives after the date of death does not go on the final return, even if it was earned before. The last paycheck, the dividend paid a week late, the IRA not yet distributed: these are “income in respect of a decedent” and belong to whoever receives them, the estate or the heir. We go through every 1099 with the date of death beside it and split the year in two. A 1099 for the full year in the deceased’s name is normal; what matters is where each dollar lands.
If the estate earns $600 or more of income while it is being settled, interest, dividends, rent, or a gain on something sold, it files its own return, Form 1041, under its own tax ID number. Income it passes to heirs is taxed to them on a Schedule K-1; income it keeps is taxed to the estate. A living trust that becomes irrevocable at death files the same form.
A different tax entirely, on the value of what the person owned. For 2026 the exemption is $15,000,000 per person, indexed from here on, so very few estates owe it. A surviving spouse can elect to carry over the unused exemption, worth doing even when no tax is due. Gift and estate taxes.
Assets that pass by beneficiary designation or joint title, such as IRAs, life insurance and a jointly owned home, never touch Form 1041.
The most valuable rule in this area, and the one most often overlooked.
Property you inherit takes a new cost basis equal to its value on the date of death. A house bought decades ago for a fraction of today’s value has today’s value as its basis in the heirs’ hands; sold soon after, there is little or no gain. The same is true of stock, mutual funds and land.
For married couples, half of jointly owned property steps up when the first spouse dies; Colorado is not a community-property state, so the other half keeps its original basis. A surviving spouse who sells the home within two years of the death can generally still use the full $500,000 home-sale exclusion on top of the step-up. Selling your home.
Retirement accounts do not step up. Every dollar in a traditional IRA or 401(k) was never taxed, and it is taxed to whoever takes it out. Get a date-of-death value for every account and property now; the question comes up when the asset is sold, perhaps years from now.
This is where people make expensive mistakes, usually by doing nothing.
| Beneficiary | The rule |
|---|---|
| Surviving spouse | May treat the IRA as their own or keep it as an inherited IRA. Treating it as their own is usual; a younger spouse who needs the money before retirement age may prefer the inherited account, which has no early-withdrawal penalty. |
| Most other people: adult children, siblings, friends | Must empty the account by the end of the tenth year after the death. If the owner had already reached RMD age, annual distributions are also required in years one through nine, enforced from 2025. Missing one brings a penalty. |
| The owner’s minor child | Takes annual distributions over their own life expectancy until 21, then the 10-year clock starts. |
| Disabled or chronically ill beneficiary; anyone not more than 10 years younger than the owner | May stretch distributions over their own life expectancy. |
| An estate, a charity, or a trust that does not qualify | Shorter deadlines apply: five years if the owner died before required distributions began, otherwise payouts over the owner’s remaining life expectancy. Naming the estate is the mistake we see most often. |
Inherited Roth IRAs follow the same timing rules, but the withdrawals are tax-free.
The planning question for a non-spouse heir is when. A large IRA taken all in year ten lands on top of that year’s income and can push a working heir from the 22% bracket into 24% or beyond. Spread over the ten years, heavier in a year the heir is between jobs or newly retired, it can cost far less. We lay the ten years out on one page with the heir’s own income. Retirement income and RMDs.
A gentle slope rather than a cliff, but a short one.
File jointly, with the full $32,200 standard deduction and joint brackets. If the person who died was 65 or older, the $1,650 age add-on and the $6,000 senior deduction still apply for that year.
A survivor with a dependent child at home may file as a qualifying surviving spouse, keeping the joint deduction and brackets for two more years. Without a dependent child, this step is skipped.
Single, with a $16,100 standard deduction and brackets half as wide: the 22% bracket ends at $105,700 instead of $211,400. The same pension and IRA income is taxed at higher rates, more Social Security becomes taxable, and Medicare premiums can rise.
This is the widow’s penalty, and the time to plan for it is while both spouses are alive. Understanding the widow’s penalty.
Colorado keeps this simple.
Colorado has neither. Nothing is owed to the state on what you inherit.
A final Colorado return accompanies the final federal one, with the same filing status and dates. The estate files a Colorado fiduciary return if it files a federal Form 1041.
Taxed at 4.40% like any other IRA income. An heir 55 or older can use the Colorado pension subtraction against them. Colorado for retirees.
When you are ready.
Bring what you have, in whatever order. We will tell you what is missing and what can wait. Call 303-734-1040.
Often not. The usual filing thresholds apply. If tax was withheld from anything, though, filing gets it refunded. Do I need to file?
Cash, a house, stock and life insurance are not income to you. A traditional IRA or 401(k) is, as you withdraw it. Income earned after the death on what you inherited is yours to report.
You can, and all of it will be taxed in one year. Opening the inherited IRA first keeps every option open. Do not roll it into your own IRA unless you are the spouse; that cannot be undone.
Yes, unless you remarry before December 31. For the next two years you may qualify as a surviving spouse if a dependent child lives with you; otherwise you file single.
We prepare final returns, estate returns and inherited-IRA plans at whatever pace you need. In person in Lone Tree or remotely, year round.
This page is general information, current as of October 2026, and is not advice about your situation. Tax law changes every year. Confirm anything that matters to you with us or at the sources below.