Sep232025
Probate Q&A Series

What income tax filings does the estate need to complete once business asset information is collected? – North Carolina

Short Answer

In North Carolina, an estate is a separate taxpayer. After you gather business asset and income details, you generally file: (1) the decedent’s final individual returns (IRS Form 1040 and NC Form D-400) and (2) the estate’s fiduciary income tax returns (IRS Form 1041 and NC Form D-407) if the estate has $600 or more of gross income, has any nonresident alien beneficiary, or makes distributions during the tax year. The estate’s 1041/D-407 are due the 15th day of the fourth month after the estate’s chosen fiscal year-end; the final 1040/D-400 are typically due April 15. Extensions are available, but taxes may still accrue interest.

Understanding the Problem

You are the North Carolina executor handling probate. You want to know which income tax filings you must complete once you have the business asset information in hand. Because you are the sole heir, any estate distributions will go to you, but the filings still run through the estate and the tax agencies, not the Clerk of Superior Court.

Apply the Law

Under North Carolina law, the estate operates as its own taxpayer for income tax purposes while it is open. You obtain an EIN, collect income information (including K-1s from any pass-through business), decide the estate’s fiscal year, and prepare the federal fiduciary return (Form 1041) and the North Carolina fiduciary return (Form D-407) when required. Separately, the decedent’s final individual returns (Form 1040 and NC D-400) must be filed for the year of death. The Clerk of Superior Court oversees estate accounting; you must support your final account with bank statements and vouchers, including showing a zero balance when you close.

Key Requirements

  • Get the estate’s tax identity: Apply for an EIN and notify the IRS of your fiduciary role (Form 56) so tax notices route to you.
  • File the decedent’s final individual returns: File IRS Form 1040 and NC Form D-400 for the year of death by April 15 of the following year (extensions available).
  • Determine if the estate must file fiduciary returns: File IRS Form 1041 and NC Form D-407 if the estate has $600+ gross income, any nonresident alien beneficiary, or if the estate makes any distributions during the tax year (regardless of income).
  • Choose an estate fiscal year and meet deadlines: Estates may use a fiscal year; the 1041/D-407 are due the 15th day of the fourth month after that year-end (Form 7004 and NC D-410P can extend filing, but interest may accrue).
  • Issue and receive K‑1s as needed: Report pass‑through business income to the estate and issue Schedules K‑1 to beneficiaries for distributions of DNI.
  • Keep records for the Clerk: Provide vouchers and bank statements with your annual/final account; show a zero balance to close.

What the Statutes Say

Analysis

Apply the Rule to the Facts: As the executor and sole heir, you should obtain an EIN and file Form 56 so tax agencies communicate with you. You must file the decedent’s final 1040 and NC D-400 for the year of death. Because the estate holds a business interest, expect income reported to the estate (and possibly to you via K‑1s if you receive distributions). If the estate has $600 or more in gross income or makes any distributions, file Form 1041 and NC D‑407 by the fiscal‑year deadline; keep bank statements to prove a zero balance when you file the final account with the Clerk.

Process & Timing

  1. Who files: Executor. Where: IRS and North Carolina Department of Revenue; accounting with the Clerk of Superior Court in the county of administration. What: Apply for EIN (IRS Form SS‑4); file IRS Form 56; decedent’s final IRS Form 1040 and NC Form D‑400; estate IRS Form 1041 with Schedules K‑1 and NC Form D‑407; extension forms IRS Form 7004 and NC Form D‑410P if needed; annual/final account on AOC‑E‑506. When: Final 1040/D‑400 by April 15 (next year); 1041/D‑407 by the 15th day of the fourth month after the estate’s fiscal year end.
  2. Collect pass‑through business documents (K‑1s), bank and brokerage statements, and expense vouchers. Choose the estate’s fiscal year early to optimize timing and distributions. Allow time for any extensions; interest can accrue on unpaid tax.
  3. After returns are filed and debts are paid, zero the estate checking account, attach bank statements and vouchers, and submit the final account to the Clerk of Superior Court for approval and discharge.

Exceptions & Pitfalls

  • Distributions trigger filing: If the estate makes any distributions during the fiscal year, file both federal and state fiduciary returns even if income is under $600.
  • Estimated taxes: If the estate remains open into a taxable year ending two or more years after death, federal estimated tax payments (Form 1041‑ES) may be required.
  • Pass‑through complexity: S corporation and partnership interests issue K‑1s; report the estate’s share correctly, and issue K‑1s to beneficiaries for distributed DNI.
  • Extensions vs. payment: Filing extensions (Form 7004; NC D‑410P) extend time to file, not necessarily to pay without interest.
  • Closing proof: The Clerk may require vouchers and bank statements showing a zero balance with your final account; missing documentation can delay discharge.
  • Estate tax returns: Most North Carolina decedents do not owe state estate tax for deaths on or after 2013, but a federal Form 706 may be required for larger estates; thresholds change, so confirm current amounts.

Conclusion

Once you collect the business asset details, file the decedent’s final individual returns (IRS 1040 and NC D‑400) and, if the estate has $600 or more of income, has a nonresident alien beneficiary, or makes any distributions, file the estate’s fiduciary returns (IRS 1041 and NC D‑407). Choose an estate fiscal year, keep vouchers and bank statements, and close by filing the final account with the Clerk. Next step: select the estate’s fiscal year and calendar the 1041/D‑407 due date (15th day of the fourth month after year‑end).

Talk to a Probate Attorney

If you’re dealing with estate income tax filings and business interests during North Carolina probate, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.