If you are an executor of an estate in Ohio, there are several duties for which you are responsible. Not only must you identify the assets and pay off its debts, but you must also distribute the remaining property to the beneficiaries. Tax-related issues are an aspect often overlooked. Failure to address them can result in the IRS coming after you. At Metz, Bailey & McLoughlin, we regularly assist clients in working through the estate administration process.
According to MarketWatch, there are several steps to consider when closing an estate.
Filing the final tax return for the decedent is essential. Preparation is much the same way it would if he or she were still alive. If there is a living spouse, it may be a joint return. It includes the deductions and income up to the time of death, plus the spouse’s tax data for the whole year. If unpaid uninsured medical expenses are remaining, you may have a few different ways to handle them for tax purposes.
There is also an estate income tax return, which is different from the federal estate tax return. Complete Form 1041 if the annual gross income is higher than $600. The tax law related to this area is complex, and an experienced professional can help you work through the details.
Form 706 helps you address estates under $11.4 million and sizable gifts. Although life insurance proceeds are typically free of income tax, you must include them in the estate for tax purposes. Depending on the size of the estate, a professional can help you reduce the tax payment requirements.
Get an employer identification number if you must file either the 1041 or 706 form, and open a checking account in the estate name. This allows you to accept deposits and pay outstanding bills. Form 56 notifies the IRS that you act on behalf of the estate. Each situation is different. Getting assistance from a professional can help take the headache out of the process and help ensure the proper closing of the estate. Visit our webpage for more information on this topic.