Estate Tax form 1041 question - Please help

When my first wife passed away I was advised by the estate attorney to file a 1041 with zeros. It serves as a place holder, and tells nosy state tax authorities ( California's FTB) that all is kosher.

Unfortunately California gets copies of things like 1099's and looks for either a California tax return or a federal one with zeros.

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Even if it results in no tax, the sale of her residence should probably be reported, as that is a large amount that the IRS may query about if no return is [otherwise] filed.

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Thanks! Well, Now I'm really confused... My CPA got annoyed at me. He insists that even though the SS-4 form says I must file the 1041 by Jan. 15,

2009, I don't have to since the IRS doesn't know what my fiscal year is. Says since the EIN was issued in November of 2007, they assume 1-15-09. Tells me he wants to file a first and final 1041 for 2008 and list the sale of the property. He insists I don't have to meet the 1-15-09 deadline and I won't recieve any notices. If I do he would just write the form wasn't sent because there was no income in 2007 (that's a true statement. There was no estate income in 2007, no 1099's or anything). The estate is not closed yet as we are waiting for the surrogate court to dismiss me. My fathers CPA says we should send in the 1041 with zero's for the first one but can't have it ready by 1-15 and it won't matter if its late.

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First 1041 return is due Dec 15, 2008 (16 months after date of death), however, if no txable income, no penalty for late filing..

Why have you got $300K siting fallow for 17 months? He should have distributed the house proceeds and other investments to you long ago, or at least put the $300K in some type of investment account, even if only 2% bank acount to earn $10,000 by now.

ed

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This is a retransmission in case my reply sent from a temporary userid got lost or blocked:

The normal filing period for a 1041 is no different than the

1040. If on a calendar year basis, the return is due by 4/15 of the next year. You can elect to use a fiscal year. If you use a fiscal year, the return is due by the 15th day of the fourth month following the end of the fiscal year. There is no filing requirement until the estate has at least $600 of gross income or one of the beneficiaries is a nonresident alien.

If you file late, there is no penalty if there is no tax liability on the return.

Personally, I use to tell every client that a 1041 for an estate should be filed if there was any income or if there was any inkling that there just might be some income. Filing a tax return starts the statute of limitation clock. If you don't file, there is no statute of limitation and you could be subject to a failure to file a timely return penalty if you have to file later and there is a tax liability. You never know what can come crawling out from under the woodwork in the way of income after someone dies.

Thanks to all for chiming in. I called my CPA and he explained to me that he would rather do a first and final in one shot that includes the sale of the house. That would do it all with one form and I'm done. For my situation there is no reason to establish a placeholder or whatever in some cases he does send in 1041 with zero's. The form is assuming 1-15-09 based on the date the EIN was issued. He assured me I won't get notices(yeah famous last words :) ), etc. and if I do the response would no income for 2007. Just for the sake of the thread and those that do searches that might have this same question about the form and the wording. Let me first remind that the reason for the post was the wording on the form "based on this request you must file form 1041 by "1-15-09" even though form 1041 specifically states to file the form if income of 600.00 or more. When the property was sold no 1099-S was issued so I have no knowledge of any 1099's out there as of now anyway. BTW - There was no gain on the property as the appraisal, and sale price are equal.

Ed - thanks for the concern but most of the money WAS distributed, so there's a few bucks in there just in case the surrogate court has questions and to pay my final Lawyer and accounting fee's(However I'm going to move the money and close the acct ASAP).

Please note Surrogate courts are slow and so is my Lawyer. Here in NYS the estate(not estate account) must stay open for 7 months. My dad doesn't want the money so the lawyer had to file renounciation of his interest so I would get the dough. Then out of the blue I recieved notification of a workers comp case that was out there(we had no idea, my sister never told us about this), and a settlement was forthecomming. So.. We had to get approval of the court for me to accept the settlement (around 25 grand). That kept it going till I recieved the check in Nov. Finally, my lawyer is now going to file to close the estate and relieve me of my duties as administrator and hopefully that goes fast and smooth so I can be done with this. You know losing a sister and having to deal with these things doesn't make for happy times. My interest is to close the estate, satisfy the IRS and go on with my life. My dad and I just want closure. I'm sure anyone that has had to go through this can relate.

Thanks again for the responses, I learned a lot from you all and I thank you for that.