With tax season in full swing, it is not just tax payers who are concerned about filing taxes. The confusion over how to complete tax forms may not go away for executors tasked with administering an estate. Obscure and dense tax forms can be vexing; especially for those who do not regularly deal with them.
But due to legislation passed in 2015, executors must now complete IRS tax form 8971. This post will briefly explain what the form is and why it can be confounding.
Essentially, the form is required to report the tax basis of decedent owned property that is passed to a beneficiary. The tax code calls for executors to furnish a statement to the IRS and the person acquiring any interest in the decedent’s property detailing the value of such property as well as any other information that the IRS may deem necessary.
The tax code also provides that each necessary statement must be furnished at any time that the IRS may prescribe, but no later than 30 days in which the original estate tax return is filed.
While the basics may seem easy enough, several elements of the form and the rules behind it may not be. For instance, when should Form 706, (for generation skipping transfers) be filed? Also, what should the penalties be, if any, if an executor fails to file the applicable form but has otherwise acted in good faith?
These are questions to be directed to an estate planning attorney experienced with tax forms.