Thursday, April 2, 2009

What Everybody Ought to Know About Death and Taxes

If you are executor of the estate of someone who has died, you may wonder what happens to their unpaid tax debt. Many think the tax debt dies with the person. This is not true. If the decedent has assets, then the IRS will require that the estate pay out the surviving equity in the taxpayer’s assets as defined by local property laws.

The executor of the estate must apply to the IRS for a Employer ID Number and set up estate checking account in the decedent's name. Follow this link to apply for an EIN for the estate. Don't be confused by the name Employer Identification Number. This is the correct ID number.

You will have to deposit the proceeds from the sale of all assets the decedent owned into the checking account set up for the estate which is tied to the EIN you received. Should the sale of all assets from the decedent not be sufficient to cover the tax liability, the remainder of the liability is written off.

This is often a complicated matter and you may need the services of an attorney and a tax professional to assist you with handling the estate. If you have additional questions about your responsibilities for the estate you should review IRS Publication 559.

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