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

[Tom Stuen]

Eric:  I think for an independent PR you must ask for transcripts if you do
not know that tax returns were filed for the last six years of the estate.
If the transcripts show insufficient income to require a return, then you
are OK.    In a solvent estate, a surviving spouse or sole beneficiary child
would not have to do this because, if there were a tax owed, it would be
paid from the inherited funds.

Tom

 

From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
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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