Not Complicated Estate Tax Return Question

[Splash]

I was my mom's guardian and am now the personal representative for her estate. The assets include a small non-interest bearing checking account and the home that will be transferred to her husband. Unfortunately, by the time I realized mom hadn't added her second husband to the deed, she was no longer competent to do it. Huge mistake!

My lawyer requested the estate tax ID# and told me that I would need to hire a CPA to complete an estate tax return. So, I was not surprised in June when I received a letter from the IRS informing me that based on information provided by my representative I must file Form 1041 by 11/15/18.

Now that the time to file is drawing near, I looked at the 1041 instructions to see if I can do the return myself or if I really need to hire a CPA. The instructions indicate a return is not required if estate income is less than $600. Mom's estate had no income. I'm wondering if I should 1) Do nothing i.e. not file, 2) File essentially a blank return, 3) Send the IRS a communication that I will not file and why, or 4) do something else.

Has anyone else dealt with something similar? What did you do and how did it work for you?

 

[GrayHare]

My choice is "3) Send the IRS a communication that I will not file and why"

 

[gwraigty]

What information did your representative give the IRS that would have caused this letter to be generated to you?

According to the instructions, you shouldn't need to file the return or communicate with the IRS about this at all.

 

[SecondCor521]

If you read the instructions carefully and they indicate not to file, then I would save off that documentation from the IRS, highlight the relevant portions, stick it in a folder labeled with the tax year, and not file anything with the IRS.

More generally, I try to do exactly what the IRS says to do even when I don't understand why, and I try to document everything so if there's a question later I can go back and at least explain where I was coming from. I figure that this course of action will keep me out of prison and maybe avoid penalties. Paying up for mistakes plus interest is fine with me.

 

[ERD50]

What information did your representative give the IRS that would have caused this letter to be generated to you?

According to the instructions, you shouldn't need to file the return or communicate with the IRS about this at all.

From the OP:

My lawyer requested the estate tax ID# ...

That would do it, as well as informing SS of the death, so that you no longer receive SS checks.

 

[gwraigty]

From the OP:
...as well as informing SS of the death, so that you no longer receive SS checks.

I didn't receive any such letter from the IRS after my parents died (one in 1991 and the other in 2008). In both cases, SS was notified. A major difference though is that my parents were insolvent.

 

[ERD50]

I didn't receive any such letter from the IRS after my parents died (one in 1991 and the other in 2008). In both cases, SS was notified. A major difference though is that my parents were insolvent.

It may have just been requesting the estate tax ID# then.

-ERD50

 

[ocean view]

You may be able to resolve this by phone.

But in general, if the IRS contacted you they are looking for a response in some form: a filed form, a letter or a phone call. If you do nothing, you are assured of getting another notice.

I’d recommend a call, but not until after 10/15 when the call volume will be less, so that you can give the facts & answer any other questions the agent has. Be sure to note the ID# of the agent and date and time of the call for your records.

 

[Bamaman]

O

 

[Bamaman]

Of course you want to get the EIN # for the estate. In our city, the Social Security office scours all of the obituaries and they mark their records as deceased. No one needs to notify them of deaths, other than to get the small social security payment to the estate.

I assume the DH will have to probate the estate--so the executor can have the probate judge give the executor the authority to sign the home into his name. Had he earlier been put on the deed with joint rights of survivorship, most likely probate proceedings wouldn't have been required.

 

[Splash]

What information did your representative give the IRS that would have caused this letter to be generated to you?

According to the instructions, you shouldn't need to file the return or communicate with the IRS about this at all.

The only thing I can think of is that the lawyer didn't indicate that the estate would have income of less than $600 when he requested the estate tax ID number from the IRS. I don't want to ask him because it will cost me $75 to hear his explanation and I don't think it won't change anything.

 

[Splash]

I assume the DH will have to probate the estate--so the executor can have the probate judge give the executor the authority to sign the home into his name. Had he earlier been put on the deed with joint rights of survivorship, most likely probate proceedings wouldn't have been required.

You are exactly right.

 

[CaliKid]

It's very common to get an EIN for an estate and then be under the reporting threshold for the 1041. I would just notify the IRS of that fact. You might make the estate account no interest bearing so the IRS has no reason to expect anything from you.

 

[GalaxyBoy]

I had to get an EIN for Dad’s estate so I could open a checking account to take care of the bills. Income last year was < $600 so no tax return was filed. I never got a notification from IRS that a return was required.

This year, however, income was over $600 so I’ll need to file. Deductions plus exemptions exceed $600 so no tax will be due. (Note that the reason for the $600 is because that’s the value of the personal exemption, so you’ll take that much off the top in any case, leaving negative income.)

OTOH, I had to go meet with IRS because we never saw his refund from his last 1040, which I filed after his death. The reason was that I didn’t include a copy of the letter appointing me executor with the return. I pointed out (in person) that the instructions specifically said not to. “Doesn’t matter,” the rep said. They like to see it anyway. So it wouldn’t hurt to file a $0 due return, and maybe I should file one for last year, too.

 

[Splash]

Thanks everyone for your suggestions.

I've decided to send the IRS a letter informing them that I will not be filing Form 1041 because the estate has no income or income producing assets.

 

[Katsmeow]

It's very common to get an EIN for an estate and then be under the reporting threshold for the 1041. I would just notify the IRS of that fact. You might make the estate account no interest bearing so the IRS has no reason to expect anything from you.

Yes, this seems common. I recently got an EIN for my mom's estate. I had to have it to get an estate bank account opened so I could deposit a couple of small checks. She has a couple of checks coming in that are non-taxable (refunds of insurance that were automatically debited after her death). There may be a couple of small checks totalling under $600.

The estate will be selling her house. However, I do not expect any taxable gain on the sale.

 

[38Chevy454]

Thanks everyone for your suggestions.

I've decided to send the IRS a letter informing them that I will not be filing Form 1041 because the estate has no income or income producing assets.

Always best to deal with IRS in writing, not over the phone. Also include copy of the original letter that IRS sent you to start this process, so they can ensure to make the connection.


I have done 1041's for my parent's estate and another trust I am trustee for. It is not a big problem for simple returns, I do it manually because I do not want to spend the money for the higher level tax return software that will do form 1041.

 

[Souschef]

The estate will be selling her house. However, I do not expect any taxable gain on the sale.

Remember to get her house appraised for the stepped up basis!