Families With Deaths Require Your Knowledge From EA CPE
Whenever a death occurs, the remaining family members need help from a variety of professionals. Your enrolled agent expertise is one of those valuable services. Look to build your enrolled agent practice from simply promoting your knowledge for dealing with the tax matters related to a decedent.
Several tax return filing requirements exist after someone dies. This responsibility rests with the estate executor. By reaching out to these individuals, you alleviate a significant burden for them. Firstly, income tax reporting is required for decedents. This can require two tax returns if the death occurs before a prior year return is filed. The final tax return is for the year of death.
The income tax return for a decedent indicates that the taxpayer is deceased and the date of death. The final tax return for someone who has died can be jointly filed with a surviving spouse. In fact, surviving spouses are normally executors of the decedent’s estate and sign the return for the deceased taxpayer.
Your enrolled agent continuing education reinforces your skills to deal with separating the personal taxable income of decedents from their estates. Income earned after the date of death is taxable to a decedent’s estate. This occurs due to delay in transferring income-producing assets to beneficiaries.
Training for the enrolled agent test teaches you how to prepare income tax returns for estates as well as individuals. Estates use the same tax deductions and credits as individuals. All types of income that are normally taxable to individuals are reported on an estate income tax return when payment is received after death and before distribution to beneficiaries.
The big effect is that an estate gets a tax deduction for distributions to beneficiaries. Net income after deductions that’s transferred to an estate beneficiary is taxable to that individual recipient. The estate is only assessed income tax on the income it doesn’t distribute.
Your EA CPE also keeps you apprised on estate tax issues in addition to income tax matters. Most estates escape estate tax because their sizes are less than the exemption threshold. Starting in 2010, most estates with values of less than $5,000,000 are exempt from federal estate tax.
Making an estate tax determination requires considering all assets of the decedent’s estate. Any liabilities owed as well as charitable contributions and administrative expenses paid by the estate are subtracted from total asset value to ascertain whether estate tax is applicable.
Estate administrators commonly misunderstand tax procedures for decedents. That’s why they need to find out about the services of enrolled agents. They require assistance in gathering records and conducting accurate tax calculations. Working with estate executors is an excellent way to grow your tax practice because they benefit significantly from your expertise.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
