How to Help Prepare for the Estate Tax Return Filing

The first thing you should do is gather a complete profile of the property of the deceased individual such as bank and account statements, property records, life insurance policy statements, business appraisals, and similar records will be crucial for the tax preparer to review. 

Once you have gathered this information for your tax preparer, authorize the IRS to be able to share with and obtain tax information from your tax preparer. Without this authorization, your tax preparer’s ability to assist you with the preparation and filling of the estate tax return will be severely limited. In addition, as the executor of the deceased’s estate, you will need to file IRS Form 56, Notice of Fiduciary Relationship, so that the IRS will know that you are the contact person and the one ultimately responsible for answering any questions that arise during the tax preparation and filing process.

Valuing Specific Items of Property

Properly valuing certain items of property such as real estate, business interests, collections of art or other collectibles like firearms, coins, jewelry, and other high-value items will not only be required for establishing the value of the gross estate for estate tax purposes, but will also be important to the individuals who will ultimately inherit the property. 

It is important to document the date-of-death value of any property as the IRS may claim more capital gains taxes are due on the sale of that property than would otherwise be justified. 

Once you have determined the value of the property through the use of professional appraisals or by other reliable methods, document how these items were valued and let your tax preparer know.

Be aware that when it comes to valuations of unique property such as art, certain real estate, and business interests, using professional appraisers may be more expensive. However, using professional appraisers can also result in greatly decreased risk of being challenged by the IRS, which may ultimately save you far more time and expense in the long run. 

How Long Does This Process Take?

If you need more time then the extended six months the IRS can grant that we previously mentioned, you can request additional time for “good cause shown” if you can convincingly explain to the IRS why it would be unreasonable or impractical to file the return prior to the fifteen months otherwise available through the automatic extension period. 

Regardless of when the tax return is ultimately due, the tax payment (even if only estimated) is due nine months after the date of death. Failure to pay will cause the estate to incur penalties and interest. Be aware that requests to extend tax filing deadlines and for extending payment deadlines are independent of each other. You must request both if you need both.

Conclusion

For now, federal estate tax returns are still fairly rare because of the historically high estate tax exemption amounts available to taxpayers. However, it may still be advisable for a surviving spouse to file an estate tax return to preserve the DSUE. At Music City Estate Law in Franklin, TN, we are happy to go through the process with you. Don’t hesitate to contact us today!

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