Once the Personal Representative/Executor has paid the final bills and has the estate expenses under control, the next step in probating the estate is to pay any income taxes and estate taxes that may be due.
The Personal Representative/Executor will need to prepare and file the decedent's final federal and/or state income tax returns and pay any taxes that may be due in a timely manner. The final federal income tax return will be due on April 15 of the year after the decedent's year of death.
Aside from filing the decedent's final income tax return, if the estate earns income during the course of administration, then the Personal Representative/Executor will need to prepare and file all required federal estate income tax returns (IRS Form 1041) as well as any required state estate income tax returns.
If the decedent's estate is taxable for federal and/or state estate tax purposes, then the Personal Representative/Executor will be responsible for preparing and filing the federal estate tax return (IRS Form 706) and/or a state estate tax and/or inheritance return, and paying the tax bills.
Note that some estates may be required to file a federal estate tax return even though no estate tax will be due. Refer to When is a Federal Estate Tax Return Required to Be Filed? to determine if Form 706 will be required to be filed for the decedent's estate.
Once all of the income tax and estate tax issues have been resolved, the final step to settling the estate is to make distributions of what's left to the estate beneficiaries.
Probate Checklist - 6 Steps to Probating an Estate