According to the Internal Revenue Service (IRS), an Estate Tax is a tax that is imposed on your right to transfer your property and belongings after your death. The individual who is in charge of handling and filing an Estate Tax return is often the estate representative. An estate representative can be a family attorney or a family member who was declared the executor of an estate in a will. When dealing with an Estate Tax, there are a number of things that an individual or family must do when preparing to deal with the Internal Revenue Service (IRS).
An Estate Tax return is due to be submitted to the Internal Revenue Service (IRS) nine months after the estate owner passed away. As with regular tax returns, it is possible for estate representatives or family members to obtain a deadline extension. If tax is owed on the estate, it still needs to be paid before the nine months arrives even if an Estate Tax return deadline was granted. Not paying the estimated amount of estate taxes due can result in late fees or additional penalties.
The Internal Revenue Service (IRS) will determine the amount of Estate Tax owed by taking the fair market value of all property items that were previously owned by the estate owner before he or she passed away. Fair market value takes into account when an item was purchased and exactly how much it is worth today. When all of those items are added up the total is referred to as the Gross Estate. As with traditional tax returns, estate taxes are allowed tax credits and tax deductions. When all of these items are computed together the amount of tax owed will be determined.
When an Estate Tax return is being filed with the Internal Revenue Service (IRS) there are a number of other important documents that must be sent along with the return. These items include a copy of a death certificate, copies of property appraisals, copies of litigation documents that may apply to the estate property, and a copy of the deceased’s will. As previously mentioned, an Estate Tax return can be filed by a lawyer, an estate representative, or a family member. Individuals can acquire the Form 706: United States Estate (and Generation-Skipping Transfer) Tax Return by contacting the Internal Revenue Service (IRS) or by downloading the form online.
Only a small percentage of Americans are required to file for an Estate Tax return; however, that does not mean that taxpayers do not need to know and understand what an Estate Tax is. A taxpayer may not own a high valued property; however, that does not mean that they cannot inherit one or be named an estate representative by a friend or family member who has passed on.