[WSBAPT] Administrator duty to search for indications of pre-death unfiled tax returns?

[Eric Nelsen]

I like it for the potential coverage, but I wonder what I would advise a PR to do if say, we discover that the decedent didn't file a return 15 years ago. Unlikely to have any remaining documentation concerning income in that year...I guess we'd ask the IRS for any W-2s and 1099s reporting income for that year, and file a return only for the income that had been reported to the IRS?

This is one of those scenarios where I think I'd prefer to advise the PR to meet only the minimum duty to investigate, and otherwise let sleeping dogs lie. Maybe my real research should be focused on figuring out whether or not the IRS's ability to pursue a fiduciary is discharged upon closure of the Estate along with all other PR liability.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040



From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Roger Hawkes
Sent: Friday, December 12, 2014 1:13 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Administrator duty to search for indications of pre-death unfiled tax returns?

Your exchange has led me to modify our procedures.  It may be a hammer on a mosquito, but it's a light, cheap hammer.  We will routinely ask for tax filing history from IRS unless the PR has good evidence that all prior returns are filed.  Seems like a very simple, quick, and easy protection for our PRs.  Does anyone see a problem with doing that as a routine?

Roger Hawkes, WSBA # 5173
19909 Ballinger Way NE
Shoreline, WA 98155
www.hawkeslawfirm.com<http://www.hawkeslawfirm.com>
206 367 5000
Fax is 206 367 4005

From: Eric Nelsen [mailto:Eric at sayrelawoffices.com]
Sent: Friday, December 12, 2014 10:22 AM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Administrator duty to search for indications of pre-death unfiled tax returns?

Thanks Tom! Do you think a PR's liability to the IRS survives discharge following closure of an estate (RCW 11.96A.070(2)<http://app.leg.wa.gov/rcw/default.aspx?cite=11.96A.070>)? I am thinking of just the kind of nightmare-for-the-PR scenario you mention: PR searches the decedent's papers but doesn't see any problem, completes the probate and is discharged, and then IRS pursues the PR for liability on decedent's unfiled tax return from a decade before. Under IRS rules, there is no statute of limitations on unreported tax years; the S/L doesn't start accruing until a return is filed.

It seems to me, your standard operating procedure and mine are the same: PR needs to review the decedent's papers, but unless something obvious crops up, there is no duty to explicitly ask the IRS whether the decedent has filed all previous tax returns. I think that's right; but the Form 56 led me to second thoughts.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040



From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Tom Stuen
Sent: Thursday, December 11, 2014 5:14 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Administrator duty to search for indications of pre-death unfiled tax returns?

Eric:  I use a form 5495 request for release.  And obtain a transcript if it appears that tax returns were not filed.  I think the PR is responsible for taxes to the extent of funds distributed to beneficiaries.  I once represented an estate where the deceased received a deficiency notice 9 years after he had failed to file.
                Tom Stuen

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Thursday, December 11, 2014 3:25 PM
To: WSBA Probate & Trust listserve (wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>)
Subject: [WSBAPT] Administrator duty to search for indications of pre-death unfiled tax returns?

How far does a PR's duty go to determine if a decedent failed to file income tax returns? I have typically made sure that the decedent's final 1040 is done, but unless something obvious crops up in the review of decedent's papers, I don't do a huge search or explicitly query the IRS for records to ensure they've been filed in all prior years.

I ask because I am having second thoughts about IRS Form 56, Notice of Fiduciary Relationship. The instructions seem to require filing one for PR as fiduciary for the estate (that is, estate tax and post-death income), and one for PR as fiduciary for the decedent (that is, pre-death income). In Section B entitled "nature of liability and tax notices," it essentially asks the PR to say, "yeah, I'm liable for all income tax returns of the decedent." Seems a bit much to me.

Am I overthinking?

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

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