Many people think that once an individual dies, so too does their obligation to pay the government anything in taxes. Unfortunately, this is often not the case. Any income tax that they owed the government while they were alive will still be owed even though they have died. There is also the potential for the decedent’s estate to now owe inheritance or estate taxes.
If a person is not well versed in tax law, knowing what types of taxes may be owed can be confusing, as a tax appeal lawyer in Allentown, PA, like from Hoegen & Associates, P.C., can explain. This is why it is always a smart idea to consult with an experienced tax attorney to make sure that you and your family are fully protected from any issues the IRS may accuse you of. Call a law office today to learn more.
Filing Income Taxes for an Estate
When a person dies, one of the duties of the executor the estate must address is filing a tax return in order to report any income the decedent had earned during the time period from the last time they filed income taxes up to the day they died. If the decedent had failed to file tax returns for any prior years, the executor must also file returns for those years, as well.
When it comes to any back taxes the decedent owed to the IRS, there is a statute of limitation in place of how long the agency can pursue collection of those taxes. The agency has 10 years from the date the agency assessed that tax obligation. The IRS may also audit a decedent’s taxes after they have passed, however, there is a statute of limitation for that action, as well. They only have three years unless the return underreports the decedent’s income by 25 percent or more. In these cases, the statute of limitation is pushed to six years.
The executor is also required to report any income the estate itself may generate if that amount is more than $600 per year. For example, if the decedent owned rental property, the income that comes in each month in the form of rent needs to be reported to the IRS and taxes may need to be paid on that amount, depending on what type of deductions the estate is entitled to take. These taxes must be paid out of the estate before the estate is distributed to the heirs named in the decedent’s will.
Contact a Tax Attorney Today
As you can see by the above factors, tax laws for estates can be complex and confusing. An executor who is responsible for the accuracy of how an estate is handled can be quickly overwhelmed by what they are now required to oversee, especially if they had no idea that the decedent had outstanding tax issues with the IRS. Call a law firm today to meet with a qualified tax attorney for assistance.