Short Answer

In North Carolina, the personal representative files your parent’s final federal and state individual income tax returns for the year of death (typically due by April 15 of the following year). The estate is a separate taxpayer and generally must file fiduciary income tax returns (IRS Form 1041 and NC Form D-407) if it has $600 or more of gross income, any taxable income, a nonresident alien beneficiary, or if it makes distributions during the fiscal year. The estate may choose a fiscal year; those returns are due 3½ months after its year-end, with extensions available. Report any estate income, including interest and capital gains from the home sale.

Understanding the Problem

You are the personal representative in North Carolina and need to know: (1) must you file your parent’s final personal income tax returns, and (2) does the estate also need its own income tax return? Here, the estate sold the home and is holding proceeds while you manage an estate bank account and prepare accountings. This single decision turns on what income belongs to your parent versus what belongs to the estate, and the filing thresholds and deadlines that apply.

Apply the Law

Under North Carolina law, a personal representative must wind up the decedent’s financial affairs, which includes filing the decedent’s final individual tax returns and, when applicable, the estate’s fiduciary income tax returns. The final individual returns cover January 1 through the date of death. The estate becomes a separate taxpayer from the date of death and may choose a fiscal year (not longer than 12 months from death). The main forums are the IRS and the North Carolina Department of Revenue; estate accountings are filed with the Clerk of Superior Court. Key deadlines include April 15 for the decedent’s final individual returns and the 15th day of the fourth month after the estate’s fiscal year-end for estate fiduciary returns.

Key Requirements

• Final personal returns: File the decedent’s last federal Form 1040 and NC individual return for income through the date of death.
• Estate as a separate taxpayer: Obtain an EIN and treat post‑death income (interest, dividends, rents, capital gains) as the estate’s income.
• When the estate files: File IRS Form 1041 and NC Form D-407 if gross income is at least $600, there is any taxable income, a nonresident alien beneficiary, or any distributions to beneficiaries during the fiscal year.
• Fiscal year and due dates: The estate may elect a fiscal year; fiduciary returns are due the 15th day of the fourth month after year‑end; extensions are available (IRS Form 7004; NC D‑410P).
• Distributions and K‑1s: If the estate distributes income, issue Schedule K‑1s; beneficiaries report their shares, and the estate may get a distribution deduction.
• Accountings with the Clerk: File annual and final accounts on time; the annual account is due the 15th day of the fourth month after the estate’s chosen fiscal year‑end.

What the Statutes Say

• North Carolina Gen. Stat. § 105-160.2 (Taxation of estates and trusts) – Explains how North Carolina taxes estate income.
• North Carolina Gen. Stat. § 28A-19-3 (Limits on presentation of claims) – Sets creditor deadlines and notes that federal and state tax claims are exceptions.
• North Carolina Gen. Stat. § 28A-21-1 (Annual accounts) – Requires annual accounts; due the 15th day of the fourth month after the estate’s fiscal year‑end.
• North Carolina Gen. Stat. § 28A-21-2 (Final accounts) – Sets the timing and conditions for filing the final account.

Analysis

Apply the Rule to the Facts: Because the estate sold the home and is holding proceeds, any post‑death interest and any gain from the sale are estate income, not your parent’s, so they belong on the estate’s Form 1041 and NC D‑407 if filing is triggered. If the estate has $600 or more of gross income, any taxable income, or makes any distribution this year, filing is required and beneficiaries must receive K‑1s. Your parent’s wages, pensions, and other pre‑death income go on the final Form 1040 and NC return. Review the post‑death credit card charges; unauthorized charges are typically not allowable estate expenses and may require reimbursement.

Process & Timing

1. Who files: Personal representative. Where: IRS and North Carolina Department of Revenue; accountings with the Clerk of Superior Court in the county of administration. What: Final individual returns (IRS Form 1040; NC D‑400); estate returns (IRS Form 1041 with Schedules K‑1; NC D‑407); obtain an EIN; consider IRS Form 7004 and NC Form D‑410P for extensions. When: Final individual returns are typically due April 15; estate returns are due the 15th day of the fourth month after the estate’s fiscal year‑end.
2. Publish notice to creditors and hold adequate funds; claims by unknown creditors generally must be presented by the date in the notice (no earlier than three months after first publication). Tax claims are not barred by this window; plan for them before distributing.
3. File the annual account by the 15th day of the fourth month after the estate’s chosen fiscal year‑end if the estate remains open; once taxes and claims are resolved and distributions complete, file the final account and obtain the Clerk’s discharge.

Exceptions & Pitfalls

• No 1041 required? If the estate has less than $600 of gross income, no taxable income, no nonresident alien beneficiary, and makes no distributions during the fiscal year, a federal fiduciary return may not be required; North Carolina follows the federal filing trigger.
• Distributions trigger filing: Any distribution to beneficiaries during the fiscal year requires filing federal and state fiduciary returns, even with minimal income.
• Estimated taxes: Federal estimated payments can be required for estate taxable years ending two or more years after death; North Carolina does not require state estimated fiduciary payments.
• Home sale reporting: Capital gains from an estate’s sale of real property are estate income; confirm basis and closing costs before reporting.
• Post‑death charges: Do not automatically reimburse a relative’s after‑death credit card charges; verify authorization, require receipts, and seek repayment if improper.
• Accountings and deadlines: Late or incomplete annual/final accounts can delay discharge and risk surcharge; calendar the statutory due dates.
• Don’t confuse taxes: North Carolina has no state estate or inheritance tax for recent deaths, but the estate’s income may still require fiduciary returns.

Talk to a Probate Attorney

If you’re dealing with final tax filings and deciding whether the estate must file its own income tax return, 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.