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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10144
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Is the executor of a small estate required to withhold tax

Customer Question

is the executor of a small estate required to withhold tax from the distributions?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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No. Executor are not what IRS would call withholding agents ... you may be responsible for getting the 1041 done and getting the estate's income taxes paid, ...

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And a best practice IS to make any beneficiaries aware when they will be receiving items of taxable income on a K-1, so that they cab do their own tax planning...

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But the executor does not withhold

Expert:  Lane replied 1 year ago.

OK, I still don't see you coming back into the chat here, so I'll try to provide a little more general information while waiting:

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Every domestic estate with gross income of $600 or more during a tax year must file a Form 1041. If one or more of the beneficiaries of the domestic estate are nonresident aliens, the personal representative must file Form 1041, even if the gross income of the estate is less than $600..

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But this is only for items of INCOME (Rents, dividends, interest, etc) and to fulfill the fiduciary duty to beneficiaries, it is almost ALWAYS better to take a distribution deduction on the 1041 (again WHEN there's enough estate income - items of income received after the date of death - to have a need to FILE a 1041) and pass the income out to beneficiaries when possible (as trust/estate rates are SO much higher than individual rates)

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(individual rates hit 39.6% at around 400,000 of income - trust rates hit 39.6% at around 12,000 of income)

Expert:  Lane replied 1 year ago.

Please let me know if you have questions.

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But again, no, an executor is not required to withhold taxes.

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And, (probably stating the obvious here, but we get many questions in this area) simply transferring assets is not a taxable event, only INCOME generated BY those assets will be taxed either to the estate or the individual.

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Hope this has helped

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Lane

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If this HAS helped, and you don't have additional questions on this, I'd appreciate a positive rating (by clicking the stars or smiley faces on your screen) ... that's the only way I'll be credited for the work here.
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