Tag Archives: Estate Planning Tax Issues

Estate Planning and Tax Issues

 

People may get the ability to earn money soon after they complete their high school or college education, but having the ability to manage a person?s financials is not possible for everyone through a course, it can come through knowledge and experience.

Learning to pay taxes and saving on taxes is one such thing which people can get to know by checking out the tips and advices shared by tax professionals in the web and by applying them in their tax preparation.

There are scenarios where people may face tax issues and one is during estates either owning them or inheriting them or transferring them to someone and the issue would be paying taxes for them. The best way to deal with estate and tax issues would be through getting the help and guidance of a tax professional with expertise in that.

One of the popular estate tax issue scenario is, when a person who is the owner of an estate dies, the executor of the estate will be identified from the descendants will or if there is no such will, the court will appoint the administrator. Normally, the surviving spouse on the family members takes the responsibility.

Four major steps to be carried out by the executor or administrator.

1. Final 1040 filing: It is to file the descendant’s taxes for that year. If there is surviving spouse, the final joint return to be filed including the income and deductions of the descendant till the time of death in addition to the income and deductions for the complete year of the survival spouse.

2. Estate’s income tax return filing: In addition to the descendant’s final income tax, you may have to do the filing of estate income tax also. If you have to file the tax Return form 1041, it is better to hire a tax professional who has good experience in the tax law area.

3. Estate tax return filing: Form 706 for the estate tax return is to be filed. If the descendant does not have any dues, and did not do sizable gifts then there is no need for filing of Form 706.

4. Apply for EIN: If you are doing the filing of Form 1041 and Form 706 then you have to get the employer Identification Number (EIN) which is similar to Social Security number. If you have to apply for EIN, then the form SS-4 can be downloaded from IRS website and filed.

Then you have to file FORM 56 to notify that you will be acting on behalf of the descendant’s accounts.