Our team of legal and accounting professionals can handle all of your tax reporting needs, including the preparation of Personal Income Tax Returns, Fiduciary Income Tax Returns (for Estates & Trust), Estate Tax Returns, and Gift Tax Returns. Because of this, the administration of someone’s estate or trust is a seamless process, allowing you to deal with one team of professionals to handle all of your needs.
Estate Tax Forms and Inheritance Tax
If a U.S. resident dies owning assets in excess of their federal estate tax exclusion amount ($5,430,000 in 2015), then a United States Estate Tax (Form 706) return must be filed and any taxes due must be paid within nine months of his or her death. Although Michigan does not presently impose a separate state inheritance tax, some states do. For those states, it may require the preparation of a state inheritance tax return, depending upon the amount of assets held in that state.
Failure to timely file federal or state estate tax returns and to timely pay the tax due can result in substantial penalties and interest being imposed. For instance, the IRS imposes a penalty up to a maximum of 25% of the tax due, plus interest.
Deceased Spouse’s Unused Exclusion Amount (DSUE)
Another reason for timely filing of a Form 706 is to claim the deceased spouse’s unused exclusion amount (referred to as the “DSUE”). To make the election, the executor must timely file a Form 706 for the decedent’s estate, even if the executor is not otherwise obligated to file a Form 706. By doing so, the surviving spouse will have their own exclusion amount, plus the DSUE amount, which can be used (with some restrictions)to make gratuitous transfers during life and at death before being subject to federal gift and estate tax.
Fiduciary Income Tax Returns
Regardless of whether the estate or trust is subject to U.S. estate taxes or state inheritance taxes, if the estate or trust earns sufficient income it is necessary to file federal and state “fiduciary” income tax returns. Fiduciary income tax returns must be filed as long as the estate or trust is in existence and as long as it earns sufficient income. Depending upon the trust provisions, the income tax liability is paid by the trust itself or the income is “passed through” to the trust beneficiaries, who, in turn report their share of the income on their personal income tax returns.
If a person makes a gift(s) to a person above the “annual exclusion” amount ($14,000.00 in 2015) in a calendar year, it may be necessary for the person making the gift to pay a “gift tax” on the value of the gift made or apply some of their federal “credit” against such taxes, if they so choose. If a person makes a gift in excess of the annual exclusion or an in-kind gift (i.e. a non-cash item, such as art work, collectibles) below that level, it is advisable to file a United States Gift Tax (Form 709) return.
Free Consultation Regarding Your Tax Preparation Needs
We invite you to contact our experienced tax preparation team for a complimentary consultation about our services and your needs. Complete our online information form or call 888-663-7407.