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10 mar 2003 · If you are filing a return for a deceased individual, you will need to to select the correct filing status for the taxpayer, see the PA Personal Income Tax Guide . Then you will need to complete the deceased indicator on the PA-40 return and make proper notation for either taxpayer, spouse or both.
Estates and trusts are taxpayers for Pennsylvania personal income tax purposes. They are required to report and pay tax on the income (from PA’s eight taxable classes of income) that they receive during their taxable year. Estates and trusts report income on the PA-41 Fiduciary Income Tax return.
The instructions to Form PA-40 for 2023 (but not the PA-41, for some reason) includes a list of income not taxable, and included in the list is “Inheritances, death benefits, and income in respect of a decedent (IRD) as defined for federal income tax purposes.”
Interest on overdue inheritance tax is charged nine months and one day from the date of death, to the date of payment. Interest rates are detailed in form REV-1611, available at www.revenue.pa.gov. An online interest and penalty calculator is also available on the department’s online portal, mypath.pa.gov.
If an estate generates more than $600 in gross yearly income within 12 months of that taxpayer’s death, it will also be necessary to file Form 1041 (U.S. Income Tax Return for Estates and Trusts), usually by April 15 of the year after the year in which the individual died.
Inheritance Tax payments need to be directed to the Pennsylvania Department of Revenue. These payments are due upon the date of death and become delinquent after nine months. If inheritance tax is paid within three months of the decedent's death, a 5 percent discount is allowed.
However, there is a 5% pre-payment discount if the inheritance tax is paid within three months of decedent's death. By paying the tax six months early, this 5% discount amounts to a 10% after-tax return on assets on an annualized basis, which, in today’s times, is hard to beat.
