It’s not just ordinary folks who mistakenly believe that death extinguishes any obligation to file or pay taxes. The misconception is so pervasive that even some tax practitioners repeat it—one recently advised a taxpayer to simply write “Deceased” on an IRS tax bill.

But in the competition between death and taxes, taxes have a longer life. There’s the final “year of death” 1040 tax return, possible estate or trust income tax returns, and all sorts of continuing issues involving retirement accounts, inherited asset basis, and an executor’s potential liability for unpaid taxes. Here’s what you need to know–and why you might need professional help.

After a taxpayer dies, the basic filing obligation depends on this question: Would the decedent have been required to file a federal income tax return if they had lived? If the answer is yes, a final Form 1040 generally needs to be filed. (If there’s a surviving spouse, this can be done on a joint return, as we explain below.)

The same types of income that would normally be reported on Form 1040 are reported on the final return. But timing is crucial. Income received or constructively received before death generally belongs on the final Form 1040. (Constructive receipt? That means a lot of things, including that the check was received, but not cashed, before someone died.)

Deductions should also be sorted by timing. The final return may include deductions properly attributable to the decedent before death, including medical expenses (but only to the extent qualifying expenses exceed 7.5% of adjusted gross income). In some cases, medical expenses paid by the estate after death can be treated as paid by the decedent.

Income in Respect of a Decedent

Then there’s the tricky concept of income in respect of a decedent (IRD)—income earned or payable before death but not includible on the final return. IRD is just one reason even diehard do-it-yourselfers will likely want a pro to prepare that final year return and the estate’s income tax return (known as a 1041). IRD is taxed to the person or entity that receives it, typically the estate or an heir. It can include final wages, retirement account distributions, deferred compensation and accrued interest income.

One reason taxable IRD surprises survivors is that inherited capital assets–for example, stocks, real estate and collectibles–get a step up in basis to their current market value at the owner’s death. That means they can be sold right away with no capital gains due.

Not so for IRD assets.

Traditional retirement accounts are the classic IRD assets. These accounts hold income the decedent earned or accumulated but never paid income tax on. This is one of the most common surprises for surviving spouses and other beneficiaries: Distributions from an inherited traditional IRA may be........

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