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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4002
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi I prepared the last couple quarters of 941 and unemployment

Customer Question

Hi I prepared the last couple quarters of 941 and unemployment insurance for my deceased fathers small business. I wrote my name and signed as the preparer of these documents. Now the business is very close to going under (ie cannot pay rent and other payments). Am I personally responsible for the payment of taxes for those documents that I prepared? I am the executor of the estate so I know that I should make as much effort as possible to pay all the bills/taxes in the correct order according to what funds we have left in the business. Also the business is solely under my father's name. Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Welcome, THANK YOU for using Just Answer. My goal is to help make your life...a little...LESS taxing.

As the executor of your father's estate, you are not personally responsible for paying any debts of the estate. Money from the estate is used for this purpose. If the estate doesn't have enough money to pay the debts, then if there are any assets, they will need to be sold or liquidated to pay off the debts of the estate. You can refer to IRS Pub 559 for more detailed information regarding the responsibilities of an executor.

http://www.irs.gov/pub/irs-pdf/p559.pdf

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
Expert:  Lane replied 2 years ago.


I have a different answer.

Regarding taxes, IRS pub 559 states specifically that you are personally responsible for any additional taxes due.

However, there is a process for requesting discharge. Use form 5495

See this, (directly from Pub. 559)

As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. This applies even though the returns were filed before the decedent's death.

Failure to report income. If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax.

Request for discharge from personal liability for tax. An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. The request must be made after the returns for those taxes are filed. To make the request, file Form 5495. For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States.

Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period.



Customer: replied 2 years ago.

So if the taxes due (mainly for a small business) is more than the estate is worth, then I am held personally liable as the executor? Only way around this is form 5495?

 

I am mainly worried if I am personally responsible for the small business returns that I filed for him which state that I prepared the documents (with my signature).

Expert:  Lane replied 2 years ago.

It's usually only in the case of negligence in handling the estate properly that an executor ends up being personally responsible.

 

But once the dust has settled and all the estate's returns are done I would do the 5495,if there are additional taxes due and no estate money to pay them. It's just good risk management.

 

Pub 559 says that the 5495 is for income, gift and estate taxes ... but in another place it uses the words personally responsible and ANY additional taxes due.

 

You've done well by doing the returns, there are penalties for NOT reporting any income. But there's no reason not to do the 5495, especially as it relates to the 941s.

 

 

Hope this helps

 

 

Customer: replied 2 years ago.

Ok so if I do all that I can to pay the majority of the taxes due, and also file a 5495 once things are winding down, then even though some taxes are still outstanding, they'll be written off?? I was originally going to wait to be made to pay the taxes, but now I'm thinking that trying to pay the known outstanding taxes would be the best route.

Expert:  Lane replied 2 years ago.

Yes, of all the "creditors" you may have difficulty with (if any) taxing authorities have the most power to make things difficult.

They also have the most longevity.

After that (in terms of importance)you need to clean OTHER creditors that can come against the estate.

That's why there's a public announcement ... to give creditors (4 months, I believe in Washington) to make their claim.

You may not be required to make the notice by law, but it does assure that once any assets are distributed, they will be clear for any heirs or beneficiaries of the estate.

You may find this helpful:
http://www.wa-probate.com/Instructions/Probate-FAQ.htm

I think you have a good process now.

Good luck!

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4002
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 2 years ago.
Hi,

Just checking back in.

Is that everything you need?


Lane

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