Tools of the Trade

Top Ten Practice Tips for Paralegals: Tax and Accounting Issues in Estates
guest author: Kimberly A. Herrick

  1. Necessary Forms. During the initial consultation, have the personal representative or trustee fill out Form 8821 (Tax Information Authorization) or 2848 (Power of Attorney), depending upon whether the representation will involve representing the estate or trust before the IRS (as opposed to just requesting transcripts).
  1. IRS Transcripts. There are several types of transcripts that may be requested from the IRS:  Account Transcripts, which are generally available for all tax years, and show balances due as well as all transactions on an account; Tax Return Transcripts which are generally available for the three prior tax years and show the information which appears on the actual tax return and any adjustments; and Wage and Income Transcripts, which are not considered complete until July following the end of a tax year. A Record of Account is an Account Transcript and a Tax Return Transcript together.
  1. Tax Return Copies and Recreating Prior Year Returns. If prior year tax returns cannot be located, Tax Return transcripts as well as Wage and Income transcripts can provide prior year income and return information. If actual return copies are needed, Form 4506 can be filed at an expense of $50 per return requested.
  1. Additional Forms to Be Aware Of. Form 1310 must be filed along with Form 1040 if someone is requesting a refund due to a deceased taxpayer. Also, Form 8822 should be filed if the filing address for any returns is different from the last filing address of the decedent. Include a copy of letters and a death certificate, if you have not already done so with Form 56.
  1. Section 645 Election. For estates where the decedent was grantor of a revocable trust, the trustees of each qualified revocable trust ("QRT") and the personal representative of the related estate, if any, may file Form 8855 to make an irrevocable Section 645 election. This election allows a QRT to be treated and taxed, for income tax purposes, as part of its related estate during the election period (2 years following death of decedent). Although its not recommended that a personal representative or trustee make this election without obtaining professional advice on its effect, they would be wise to inquire as to the need for the election as it can have significant benefits.
  1. Form 1041 - Calendar vs. Fiscal Year. If the estate or trust has a filing requirement for a fiduciary income tax return, determine whether it's best to file Form 1041 on a calendar or fiscal year. If the estate or trust has deductions that occur after December 31 but should be matched against prior year income, use a fiscal year. The return is then due the 15th day of the third month after the end of the tax year.
  1. Bank Records. Reconcile monthly bank records for estate and trust checking accounts with your records to keep an eye out for errors.
  1. Filing Estate Tax Returns. For Estate Tax returns (form 706), request all prior year gift tax returns to determine any taxable gifts prior to death. Also, keep in mind that even though a Form 706 may not be required, it may be necessary to file one in order to preserve a surviving spouse's DSUE (Deceased Spouse Unused Exemption) portability. In any instance where a decedent leaves a surviving spouse, discuss DSUE with a tax professional. The Estate Tax return also preserves a record of the step up in basis that estate beneficiaries receive as a benefit under the Internal Revenue Code.
  1. Filing Extensions. Extension forms for Income and Estate tax returns are available on the IRS site: Form 4868 for Individual Income Tax returns provides a six-month extension for filing, Form 7004 for Fiduciary and Business returns provides a five-month extension for fiduciary returns, and Form 4768 for Estate Tax return provides a six-month extension for filing an Estate Tax return. Be aware that the extensions are for filing, not payment of tax due, but there are exceptions for Estate Taxes which are due for estates with special circumstances.
  1. IRS Publications/Website. The IRS website has very good publications for personal representatives. Publication 559, "Administrators, Executors and Survivors" contains helpful information about the individual returns, fiduciary returns and estate tax returns that may need to be filed in administering a decedent's estate.


Kimberly A. Herrick practices in Cabarrus County as an attorney for Mills Law, PA, in the areas of estate planning, estate administration, taxation, and occasional business and real property law. Ms. Herrick is a frequent lecturer for National Business Institute and teaches wills, trusts and estates in Central Piedmont Community College's paralegal technology program. She is a member of the North Carolina Board of Law Examiners, and a former professor of basic and advanced income tax at North Carolina Central University School of Law, where she earned her J.D. degree. Ms. Herrick also earned an LL.M. degree in Taxation from Georgetown University Law Center, and became a CPA in November of 2015.

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