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What Involvement Does the IRS Have in the Probate Process?

What Involvement Does the IRS Have in the Probate Process?

When a person who owns property dies, there are certain tax-related consequences. First, the decedent’s tax year immediately comes to an end for the purposes of filing the federal income tax return. The death also establishes a new tax entity in the decedent’s estate, for the estate itself.

As a result, the decedent’s personal representative may have to file multiple tax returns. Depending on the circumstances of the estate, the following forms might need to be filed:

  • The final 1040 form for the decedent, reporting their income for the year of death
  • Form 1041, Federal Income Tax Return for the Estate, which reports all taxable income for the estate
  • Form 709, Federal Gift Tax Return, which reports any gifts made by the decedent before their death
  • Form 706, Federal Estate Tax Return, which reports the gross value of the estate

A court or the Internal Revenue Service may also request that the personal representative file other forms. It is the representative’s responsibility to pay all of the amounts owed to the IRS out of estate funds. However, there are also some rare circumstances in which the personal representative could be held personally liable for unpaid taxes for the estate.

An estate does not have any payment or tax filing obligations to the state of Florida. But if the decedent owed any intangible taxes to the state for any year prior to 2007 (when the intangibles tax was repealed), the personal representative must make those payments to the Florida Department of Revenue.

The tax issues associated with estate planning can be complex and confusing. For more information on how to navigate all these issues with the IRS as a personal representative, contact a trusted Pensacola estate administration attorney with The Law Office of Zachary T. Magaha.

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