CA Estate Planning

Death &Taxes: Don't Forget the Decedent's Final Income Tax Return!

Death and taxes may be equally inevitable, but the taxman demands the last grim word. Death does not excuse a final accounting with the IRS.  Most people think about estate and gift taxes when it comes to the final IRS Tax Return; but, most people don't have to pay either.  What is frequently forgotten is filing the final income tax return for the decedent.  

I recommend reading a recent article in Kiplinger titled Death and Taxes. The burden of filing this final income tax return falls on the executor of the deceased's Will, or the Successor Trustee if the deceased had a trust; usually, they are one and the same person.  Do not neglect that duty if you occupy one of those roles.

Why? If you fail to file that last (postmortem) tax return, you will be on the hook for any sins of commission or omission. Even if an estate is not subject to extra taxation, this last rite to the IRS has to be observed.

Reference:http://www.kiplinger.com/features/archives/2007/01/deathinfamily.html 

 

Death & (Income) Taxes

Death and taxes may be equally inevitable, but the taxman demands the last word. Death does not excuse a final accounting with the IRS. In fact, taxes can further complicate the lives of survivors.

Of the two certainties in life – that is, of death and of taxes –the taxman always gets the grim last word. End-of-life taxes are, moreover, easily among the most onerous. For many loved ones, writing those last few checks to the IRS can be especially tough … and seem to never end. Enter the postmortem income tax return.

The death taxes are one thing, and inheritance taxes are generally another, since they are paid by the inheritor. However, as a recent article in Kiplinger makes clear, there usually is one final income tax return to file for the decedent. I recommend the article, titled Death and Taxes, for your reading.

The burden of filing this final income tax return is something you assign in your will, usually to the executor or administrator, or failing that it falls upon a survivor. Regardless, do not neglect that duty if you occupy one of those roles. Why? Because it is just basic estate planning and administration.

If you are planning your estate or if you are administrating one, this burden is not one to be taken lightly. To make matters worse, the fiduciary is on the hook for any sins of commission or omission. If ever there was a time to retain appropriate legal, accounting and tax advice, then this is one of them.

Bottom line: The income taxes likely are the least of your taxation concerns with the estate, inheritance, gift, and generation-skipping taxes all vying for attention. Unfortunately, that doesn’t diminish the importance of income taxes.

Even if an estate will not be subject to extra taxation, this last rite to the IRS has to be observed. 

Reference: Kiplinger (March 2012) “Death and Taxes”

 

 

 

Did your Tax Return and now you owe the IRS big-time? Get in line to settle your tax bill!

So many taxpayers are trying to make deals with the Internal Revenue Service to settle tax bills that the IRS is facing inventory backlogs and processing delays, leaving taxpayers unsure if or when their tax liabilities will be resolved.

Now that filing your Tax Return is behind you (?),I thought you might enjoy a tax-related sidebar for some levity.

Have you heard the radio ads? You know, the ones promising to help you get the IRS off your back for myriad tax troubles. Well, advertising works and, combined with myriad other channels for taxpayers seeking such relief, the result has been a growing logjam of such cases at the IRS.

Recently, Forbes reported on this problem in an article titled "Trying To Come Clean With The IRS? Get In Line." As reported in the article the number of “offers in compromise” has jumped 28% from fiscal year 2007 to fiscal year 2011. In real numbers, that represents 46,270 offers in 2007 and 59,411 offers in 2011. Here’s the rub: The number of IRS staff members handling the filings has decreased over the same period.

So, if you have filed an offer in compromise, but it has not been processed, don’t despair. The IRS is well-aware of the problem. If you have a “promised date” (when the IRS was to get back to you), then likely the IRS will give itself more time with an extension. Should the logjam continue, expect to get an “interim” letter.

Reference: Forbes (April 12, 2012) "Trying To Come Clean With The IRS? Get In Line"