[WSBAPT] Personal Rep and Income Taxes

[Ann Manley]

I'd like the book as well and will put a check in the mail.

Thanks,
Ann Manley, Esq.
The Manley Law Firm, P.S., Inc.
PO Box 16324
Seattle, WA 98116
(206)292-3064 / (206)292-3914 fax
www.manleyfirm.com

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On Mon, Sep 19, 2022 at 1:45 PM Douglas Owens <dougowens at seattlerelawyer.com>
wrote:

> Dear Phil, I am putting a check in the mail today.  Thanks for providing
> this service to us.  Yours truly, Doug Owens
>
> On Sep 19, 2022, at 11:15 AM, Philip N. Jones <pjones at duffykekel.com>
> wrote:
>
> No problem.  Go ahead and mail it
>
> Philip N. Jones
> Duffy Kekel LLP
> 900 S.W. Fifth Ave. Suite 2500
> Portland, OR 97204
> pjones at duffykekel.com
> (503) 226-1371 – office
> (503) 853-1482 – cell
> (503) 226-3574 - fax
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Sarah McCarthy
> *Sent:* Monday, September 19, 2022 10:40 AM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> well shoot, I just wrote the check to you. Should I go void it and rewrite
> it?
>
> *Sarah O’Farrell McCarthy*
>
> *(Pronouns: she / her) *Attorney | Kelly, Arndt & Walker, Attorneys at
> Law, PLLP
> P.O. Box 290 | 6443 Harding Avenue | Clinton, WA  98236
> (Located on Whidbey Island, Island County, Washington)
> Phone: (360) 341-1515 | Fax: (360) 341-3272
> sarah at kawlawyers.com | www.kawlawyers.com
> <https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.kawlawyers.com%2F&data=05%7C01%7Cpjones%40duffykekel.com%7C20676011491a488fecc008da9a666ba6%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637992061950904597%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=05%2BX4rngfM0y6c623Jwg7HS4qQUki6l%2FIkykcrk08x4%3D&reserved=0>
>
> This electronic message transmission contains information from the law
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>
> On Mon, Sep 19, 2022 at 10:33 AM Philip N. Jones <pjones at duffykekel.com>
> wrote:
>
> Maybe better to makes checks out to my firm, in case I leave before the
> check arrives.
> Phil
>
> Philip N. Jones
> Duffy Kekel LLP
> 900 S.W. Fifth Ave. Suite 2500
> Portland, OR 97204
> pjones at duffykekel.com
> (503) 226-1371 – office
> (503) 853-1482 – cell
> (503) 226-3574 - fax
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Philip N. Jones
> *Sent:* Monday, September 19, 2022 9:41 AM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> Not too late.  Make check payable to me or my firm.  Mail today and I will
> get it before I leave.
>
> Philip N. Jones
> Duffy Kekel LLP
> 900 S.W. Fifth Ave. Suite 2500
> Portland, OR 97204
> pjones at duffykekel.com
> (503) 226-1371 – office
> (503) 853-1482 – cell
> (503) 226-3574 - fax
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Sarah McCarthy
> *Sent:* Monday, September 19, 2022 9:13 AM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> Phil,
> I'd love to order a copy of your fiduciary income tax book for $25. Or
> have you already left for Spain, and am I too late to this party?
> If I'm not too late, please let me know to whom the check should be made
> out to.
> Thanks,
> Sarah
> *Sarah O’Farrell McCarthy*
>
> *(Pronouns: she / her) *Attorney | Kelly, Arndt & Walker, Attorneys at
> Law, PLLP
> P.O. Box 290 | 6443 Harding Avenue | Clinton, WA  98236
> (Located on Whidbey Island, Island County, Washington)
> Phone: (360) 341-1515 | Fax: (360) 341-3272
> sarah at kawlawyers.com | www.kawlawyers.com
> <https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.kawlawyers.com%2F&data=05%7C01%7Cpjones%40duffykekel.com%7C20676011491a488fecc008da9a666ba6%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637992061950904597%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=05%2BX4rngfM0y6c623Jwg7HS4qQUki6l%2FIkykcrk08x4%3D&reserved=0>
>
> This electronic message transmission contains information from the law
> firm of Kelly, Arndt & Walker, PLLP which may be confidential or
> privileged.  This information is intended to be for the use of the
> individual or entity named above,  If you are not the intended recipient,
> be aware that any further review, disclosure, printing, copying,
> distribution, or use of the contents of this transmission is prohibited. If
> you have received this electronic message transmission in error, please
> notify us immediately by reply e-mail and delete the original message.
> Thank you.
>
> We do not accept service of any kind by e-mail unless expressly authorized
> in writing by the attorney of record.  This e-mail is NOT a contract and is
> not binding upon the author pursuant to CR 2A. This e-mail is, at most, a
> negotiation under ER 408.
>
>
> On Wed, Sep 14, 2022 at 2:05 PM Philip N. Jones <pjones at duffykekel.com>
> wrote:
>
> Warning:  war story follows.
> I once received a phone call from a professional fiduciary.  She had
> received from her CPA a fiduciary income tax return for an estate.  She was
> to review it, sign it, write out a check, and mail the whole enchilada to
> the IRS.  She wanted me to tell her why the taxes were so high.  She sent
> me the return to review.  I called her back with one question:  Had she
> cashed in an IRA?  Yes.
> She should have known better.  But the point is that the client (in this
> case a professional) and the CPA and the attorney need to work very closely
> together.  None of them should even get out of bed in the morning without
> calling the other two to make sure that getting out of bed is OK.
> Phil Jones
>
> Philip N. Jones
> Duffy Kekel LLP
> 900 S.W. Fifth Ave. Suite 2500
> Portland, OR 97204
> pjones at duffykekel.com
> (503) 226-1371 – office
> (503) 853-1482 – cell
> (503) 226-3574 - fax
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Joshua McKarcher
> *Sent:* Wednesday, September 14, 2022 12:32 PM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> I offer the below to the extent it helps newer estate administration
> lawyers, or those who are unsure of income taxation for PRs and trustees.
>
> I do what Philip does, and I endorse his views. With respect, and
> intending encouragement to all, I do not believe an administration attorney
> can likely ethically rely on "I don't do taxes" to avoid potential
> liability for some of the traps Phil lists in his email. So, here’s how you
> might consider approaching the issue (and if you see terms below you don’t
> know, just start by googling those at least and you’ll slowly start to get
> the gist! 😊):
>
> If the decedent's former preparer was H&R Block (etc.) or a tax preparer
> who does not file (or perhaps even know of) “short-year returns,” I
> recommend they allow me to email my go-to CPA firm at the outset to engage
> them for the final 1040 and what I hope will be a single fiscal-year return
> on the 1041, if we can distribute or "turn off" income within about 11
> months from month of death.
>
> (In re “short year” and “fiscal year” and “11 months”: Notice when you
> file for an EIN online, you can choose to end the estate’s tax year at the
> end of the month immediately preceding the month in which the decedent
> died. Decedent dies August 1 (through 31), 202*2*, fiscal year ends July
> 31, 202*3*. Fiscal year vs. calendar year income tax reporting! One
> income tax return on 1041, instead of two! Yay! And then imagine you finish
> administration by February 2023 and could file a “short year” return that
> is both the estate’s “first” and “final” income tax return, filed long
> before either the end of the tax year (July 31, 2023) or the deadline even
> later in 2023. And imagine you can finalize and close your estate (if no
> estate tax returns and fairly straightforward income tax returns) before
> July in my example. Again, we can make this fun, I promise.)
>
> I then make sure the prior 2-5 years returns get to my office or the CPA
> (only because I know she will digitize and evaluate them for assets I
> haven't listed for her already and send me what I need).
>
> We immediately do a preliminary analysis of the estate's likely taxable
> assets (or at least its "tax return triggering" assets -- $600 in GROSS
> income is a very small number): real property to be sold EVEN IF NO GAIN,
> annuities left to the estate (upon which we observe a moment of silence,
> har har), investment accounts cranking out surprising amounts of income,
> corporate/LLC interests paying periodic income, maybe even bank deposit
> interest -- the usual suspects.
>
> If you just stop and think even this much, you will “get there”:
>
> *Okay, whatever regular ol’ income the decedent was making through the
> date of death, is now INESCAPABLY the ESTATE’s income in the first
> instance; cannot avoid it. Next, instead of a filing requirement at $11,000
> or whatever it is for living individuals, it’s now only $600 in a fiscal or
> calendar tax year; and trusts and estates on 1041s have way higher tax
> rates (and “compressed brackets”) in general. I can look all that up with a
> quick Google search to “see” it. Okay, so then we want individual taxation
> so that we’re REPORTING the income on the 1041, but passing out the income,
> providing K-1s (“Just like for LLCs?” “Yes!”) and having beneficiaries PAY
> the tax individually (if we have beneficiaries who will “get it” and will
> “actually do so”). So then if we get income distributed out of the estate
> in time (but by what deadline?) then we can achieve pass-through income
> taxation at individual rates for everyone vs. having the estate or trust
> pay a crazy amount of income tax because nobody was paying attention.*
>
> From there, sure, your CPA who is alerted to that initial analysis can
> perhaps “mostly take it from there” and analyze the beneficiaries’ tax
> rates, states of residence, and the possibility of simply paying the tax
> inside the estate or trust (which sometimes does make sense, especially if
> it’s very little or you simply just KNOW beneficiaries will make it more
> difficult or simply will never report it and pay it, etc. etc.).
>
> That key CPA relationship, I respectfully encourage others out there, is
> part and parcel of your administration practice. There is tremendous peace
> knowing you're either going to have a CPA with history with the client (and
> a new professional contact/friend/resource) or your own trusted partner who
> can help you spot issues and set calendar reminders in their usual process
> and work with the client directly once the big picture is clear and then
> involve you as needed and at the end when it’s time to file and close the
> estate.
>
> (No client anywhere ever says, "No, thank you. I'd like to figure out all
> of that by myself and will hope to land on my own a good CPA to help with
> it!" 😉)
>
> If you make yourself “know” that much and go learn some of the jargon
> above, I have to believe you will protect yourself from a potential
> liability claim someday that may be hard to defend by saying, “I chose to
> do estate administration but not learn even the basics of estate income
> taxation.” With respect, I just don’t personally know if that would fly.
>
> I'm guessing the 2017 resource Phil mentions "teaches" (or at least refers
> to) all of the above. But if not, find a professional tax friend who will
> teach you and give you at least a basic checklist. Over time, as each step
> in the process presents itself, you will be shocked how much you learn and
> become conversant with.
>
> Good luck!
>
> Best regards, Josh
>
> Joshua D. McKarcher
> McKarcher Law PLLC
> 537 6th Street
> Clarkston, WA 99403
> (509) 758-3345
> (509) 758-3314 (fax)
> josh at mckarcherlaw.com
> www.mckarcherlaw.com
> <https://nam11.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.mckarcherlaw.com%2F&data=05%7C01%7Cpjones%40duffykekel.com%7C20676011491a488fecc008da9a666ba6%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637992061950904597%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000%7C%7C%7C&sdata=yivF%2BnX7DaWz63YI3QQ66HQwp%2F0ScZNRqOoZ4F1OpdQ%3D&reserved=0>
> ------------------------------
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> on behalf of Philip N. Jones <
> pjones at duffykekel.com>
> *Sent:* Tuesday, September 13, 2022 5:31 PM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> We all need to work hand-in-glove with the family’s tax return preparer
> for the entire duration of the probate or of the trust administration.  If
> the decedent’s preparer will be continuing to work with the PR/trustee,
> that is ideal, and the preparer usually knows the status of prior returns
> and whether any of the prior returns have been audited or other problems
> developed.  I like to call the preparer (with the client’s permission) at
> the outset of the probate and establish that I will be preparing the
> federal and state estate tax returns, and the preparer will prepare the
> final 1040 and all of the 1041s for the duration of the probate.  But we
> all need to have a basic understanding of the fiduciary income tax, because
> so many decisions made during the probate or trust administration impact
> the fiduciary income tax and vice versa.  We cannot fully separate the tax
> issues from the estate/trust issues.  If the PR or trustee closes the
> probate or concludes the trust administration and distributes the assets
> without making sure that all of the income taxes (both 1040 and 1041) have
> been paid, the PR/trustee will incur fiduciary liability (personal
> liability) for the tax, and the beneficiaries will incur transferee
> liability.  And there are things we might do during the estate/trust
> administration that could trigger huge income tax liabilities.  And those
> liabilities are often avoidable.
> If you have the materials from the November 2017 Seattle Estate Planning
> Council annual seminar, those materials include a lengthy chapter on the
> fiduciary income tax, with lots of references to Washington law.
> Phil Jones
>
> Philip N. Jones
> Duffy Kekel LLP
> 900 S.W. Fifth Ave. Suite 2500
> Portland, OR 97204
> pjones at duffykekel.com
> (503) 226-1371 – office
> (503) 853-1482 – cell
> (503) 226-3574 - fax
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Paul Neumiller
> *Sent:* Tuesday, September 13, 2022 3:24 PM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] Personal Rep and Income Taxes
>
> “Hi, thank you using me as your attorney to help guide you through the
> probate process.  But I am an attorney and not an accountant, bookkeeper,
> or certified public accountant.  You will need to hire an accountant to
> assist you in finalizing the decedent’s taxes.  Let me know what you guys
> come up with.”    I also put this in writing in my standard PR duties
> letter to the PR right after probate is opened: “Additionally, you are
> responsible for filing Decedent's final individual income tax return for
> the year of the date of death.  You may be asked to provide the IRS with
> Form 56 (Notice Concerning Fiduciary Relationship) to establish that you
> are acting as the Decedent’s personal representative.  If you would like, I
> will work with you and your accountant on the preparation of this return.”
>
>
> <image001.jpg>
>
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>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Diane J. Kiepe
> *Sent:* Tuesday, September 13, 2022 3:11 PM
> *To:* 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
> *Subject:* [WSBAPT] Personal Rep and Income Taxes
>
> Hello All,
>
> I know this conversation went around before but I’m hoping one or two (or
> more) of you would share your process in a probate in dealing with income
> taxes for the decedent; in particular how to find out if there are any
> outstanding taxes owed for prior years.
>
> Thanks in advance.
>
> *Diane J. Kiepe*
>
> Diane J. Kiepe
> Douglas Eden
> 717 W. Sprague Ave.
> Suite 1500
> Spokane, WA  99201
> djkiepe at depdslaw.com
> 509-455-5300
>
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