Every year, about this time, everyone in the country starts to sweat a little trying to get everything together to file personal income tax returns. It can be a stressful experience, from tracking down those annoying forms that started arriving mid-January to scheduling time with an increasingly harried-looking accountant. If you are serving in a fiduciary capacity, you may be obligated to file an additional income tax return. The filing threshold for estates and trusts is only $600, meaning that if an estate or trust you administer generates more than $600 of income during a tax year, you, as executor or trustee, are required to file an income tax return for the estate or trust. This is true even if no taxes are due.
If this news comes as a surprise and meeting the April 15 deadline will be a struggle, you can file for an extension with both the Virginia Department of Taxation and the Internal Revenue Service (but note that some estates elect a fiscal year and may have a different filing deadline). If you’ve missed deadlines for past tax years, contact a tax professional to help you get back into compliance. Interest and penalties continue to accrue on unpaid taxes whether the return has been filed or not, so the sooner you tackle the project, the better. Under some circumstances, tax authorities will even waive penalties. And if you are audited or otherwise contacted by the Department of Taxation or IRS, your ability to show that a good faith effort to correct any problems is already underway will be viewed favorably.
If you have questions about estate or trust administration, including tax obligations, Schooley Law Firm, P.C. is here to assist. We know it can be challenging to meet both personal and fiduciary obligations and we are always happy to help point executors, administrators, and trustees in the right direction.