Tax Returns for Pennsylvania Estates and Probate: If you are the executor of a Pennsylvania estate, you are responsible for filing all required tax returns. This will likely include the deceased’s last personal income tax return, both Pennsylvania and federal for all income from January first through the date of death. These are Forms 1040 and PA-40. If after the date of death the estate had income, for example from a bank account, stocks or rent, the estate will also need to file a federal and states income tax return. These are Forms 1041 and PA-41. Beyond income tax, you will also file a Pennsylvania Inheritance Tax Return (Form 1500) and you might have to file a Federal Estate Tax Return (Form 706).
Inheritance Tax vs. Estate Tax: An Inheritance Tax is a transfer tax at death whose rate depends upon the beneficiary, while an Estate Tax is a transfer tax based on the gross estate and is not dependent on the beneficiary. Pennsylvania at one time had both an Inheritance Tax and an Estate Tax, but now only has an Inheritance Tax. The federal government has an Estate Tax, but no Inheritance Tax.
Does The Estate Owe Inheritance or Estate Tax? Whether the Philadelphia estate on which you are working owes Pennsylvania Inheritance Tax or Federal Estate Tax takes more analysis that this blog will allow. For more details, read 2014 Federal Estate Tax, Gift Tax and Generation Skipping Transfer Tax Law Update for Federal Estate Tax and Pennsylvania Inheritance Tax Return lawyer or a Federal Estate Tax Lawyer.