Have a Tax Question? Ask a Tax Expert
Hello and thank you for allowing Just Answer to assist you further. Your 2010 Form 1041 should have included Schedule K-1s for each of the beneficiaries that showed their share of taxable/non-taxable income. If you are using tax software, there should be guides that show you where to enter this information. You will also enter that this is the final return for the estate and show the closing date. This should automatically show the distributions to the beneficiaries.
Please explain what you mean by the estate "paid bond". If the estate overpaid its taxes in previous years, this amount should either be refunded or credited to the current year. If the tax was incorrectly calculated, the earlier return(s) can be amended. If neither of these are the case, then past years' taxes cannot be recouped. Please let me know if you have any additional questions, Bill.
Hi, thank you for getting back to me. What I meant by bond, in order for myself to be the administrator of the estate, I needed to have a bond issued to protect the estate's money that was in an account (I guess the judge thought I was a liability handling $120,000 since I had just filed bankruptcy). I initially tried to do this "in pro per" but that is where the bond came into play. The bond cost the estate roughly $750 per year and the probate dragged on for like eight years!
Excuse the bits and pieces being sent. Hitting return is submitting the info. My last question-- will the heirs be liable for tax? I don't even have their social security numbers if that's a requirement on the K-1 form. And will I use 2010 tax year since probate closed 1 month ago?
These costs are deducted from the estate's income, right? They should be since this a requirement by the judge. The estate cannot get a tax credit for this cost, but the amount absolutely should be deducted.
yes, deducted from the estate's income.
Please don't prepare these returns by hand. The returns are complex even with little or no activity. Has the 2010 return been filed?
yes, 2010 has been filed earlier this year
will i need the heirs social security numbers? I know for a fact that I won't be able to get them.
You'll need to amend it to properly show the beneficiaries names, addresses and SS#s. Has any of the funds been distributed to the heirs? If not, there may not be any tax impact on the heirs. But, the K-1s not only need to be issued with the return, they should also be reflected on their 2010 tax returns.
Yes, all the money has been distributed 2 months ago to the heirs.
If you can't get them, do what you can. Send the K-1 to those heirs and let them sort it out with the IRS.
I've got to get my daughter dressed for school, so I'll check back in half an hour for any other questions. Thanks, Bill
Well these heirs, unfortunately, are in their 80s and 90s and won't know what to do. Perhaps they may fly underneath the radar for a measly $6,400 if they don't do anything. I'm actually not really concerned with them, I'll send them their K-1s and they can figure it out. I only care about my main question of what forms I needed to submit to keep my name A-Ok with the IRS since I am the administrator.
The best way to cover yourself is to buy the software and include as much information as possible. Most accountants try to set up the returns so that the income flows to the heirs, because individual tax rates are significantly lower than estate rates. The distribution of the property itself is not taxable to the heirs. Just the income generated in 2011 such as interest, dividends, capital gains, etc. Thanks again, Bill