Episode 92: In this episode, Timalyn talks about estate taxes and something that can easily get overlooked. You may be under the estate tax exclusion and think you don't have a filing requirement, but if the estate earns income after someone passes away, that can create a separate tax filing requirement. What is the Estate Tax? First things first, the estate tax is a tax on your right to transfer property at your death. Timalyn explains that the IRS looks at everything you own or have an interest in at the date of your death. This can include your home, jewelry, real estate, insurance policies, annuities, and business interests. The fair market value of those assets is used to determine the gross value of the estate. What happens after we have the Gross Estate? There are certain deductions that can bring the gross estate down to the taxable estate. Timalyn talks about mortgages, other debts, estate administration expenses, property going to a surviving spouse, and qualified charitable gifts. She also points out that being the executor can be a lot of work, and that work can be an estate administration expense. Do I need to file Form 706? Now, with the tax law changes, Timalyn explains that there is no federal estate tax when the taxable value of the estate is less than $15 million. But check this out. She's talking about the federal level. State rules can be very different, so you need to make sure you understand the rules where the estate is located. This is also why having the right professionals on your team is important. If you're wondering what type of tax professional you may need, check out Episode 23, Which Type of Tax Professional Do I Need? What happens if the Estate earns income? This is where things can get a little confusing. The person's tax period ends at death. Any income earned after the date of death can become income of the estate. For example, if the person had rental properties, investments, savings bonds, or other income producing assets, the income earned after death belongs to the estate. If the estate has $600 or more in gross income, there is a filing requirement for Form 1041. And no, this is not Form 706. Form 706 deals with the estate tax. Form 1041 deals with the estate's income tax. What should Executors keep in mind? If you're the executor, you need access to information about the estate's accounts and assets so things can be transferred to the appropriate people. Beneficiaries may receive a Schedule K1 showing their share of the estate's income. Timalyn also explains that certain expenses, such as fiduciary fees, attorney fees, and accountant fees, may be deductible on Form 1041. Need Tax Help Now? Timalyn knows that if you've just experienced the death of a loved one and you're now having to deal with an estate, this can feel overwhelming. She encourages you to get the help you need and not try to handle everything by yourself. If you need help with the tax side, you can book a paid call with Timalyn. Remember, even if you don't work with Timalyn, use the information you've learned to empower yourself and take care of the situation. Being proactive can help keep back taxes and IRS issues from becoming another burden during an already difficult time. Remember, Timalyn Bowens is America's Favorite EA, and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode. For more information about tax relief options or filing your taxes, visit: https://www.bowenstaxsolutions.com/ If you have any feedback or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
