Managing a loved one’s estate is a tremendous responsibility. If this has fallen on your shoulders, it can be overwhelming, especially if you’ve never been in this role before. One thing you can do to make your job easier is to pay close attention to tax filing requirements. Yes, that’s right—you could be required to file multiple tax returns on behalf of the decedent’s estate. It’s important to file these on time and as required—or else you could run into headaches down the road.
So, which tax filings could be required?
Depending on the decedent’s estate, you could be required to file several different returns at different times of the year. These could include one or more of the following:
• Individual tax return
• Estate tax return
• Gift tax return
• Fiduciary tax return
What happens if you don’t file these returns?
If the decedent’s estate misses a tax filing deadline or requirement, guess who the IRS or state department of revenue will come looking for? You! What’s more, if the decedent hasn’t filed in recent years, you could be on the hook for filing those returns, too.
This is why it’s so important to ensure all required tax filings are properly prepared and filed. The filing process can be lengthy and complex, especially when multiple filings and deadlines are involved, so it’s important to get organized and begin as soon as possible.
Don’t panic…you’re not alone!
The good news is, we’re here to help. Working with professional advisors such as a CPA and an attorney can help you avoid the worry and stress of tax filings. Your professional advisors can also help you identify opportunities for minimizing taxes through the use of special elections, the selection of optimal fiscal year-ends, and by carefully timing payments of expenses and distributions. Remember, minimizing taxes for an estate or trust means more assets are available for the beneficiaries and heirs.