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Tax Tip of the Week | No. 252 | Executors Beware May 28, 2014

Posted by bradstreetblogger in : General, tax changes, Tax Deadlines, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , trackback

Tax Tip of the Week | May 28, 2014 | No. 252 | Executors Beware

You could be held personally liable….

If you should be named the Executor of an estate, you need to be aware that you could be held personally liable for any unpaid taxes of the deceased.

A recent court case highlighted a pair of Executors who discovered the deceased had not filed tax returns for several years. They had the tax returns prepared reporting the taxes due and submitted them to the IRS. The IRS then assessed additional penalties and interest.

Knowing this tax debt existed for the estate, this pair of Executors made distributions in excess of $470,000. These distributions left the estate without sufficient assets to pay the income tax and penalties.

The U. S. District Court for the District of Maryland ruled (in part): “the court cited 31 U.S.C. 3713(b), which provides that a representative of a person or estate… paying any part of a debt before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government. “

The court went on to say:  “since distributions took place after the Executors knew of the outstanding tax liability….the Executors were held personally liable of the claim of the United States.”

While it may be an honor to be named the Executor of an estate, you should not take your duties lightly. After finding an attorney to help carry out your duties, give us a call to help with your tax planning.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

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