As a personal representative of a Florida probate estate, you have to file tax returns and pay taxes for the deceased person and their estate. If you don’t do this, you could be personally responsible for the unpaid taxes, penalties, and interest to the IRS and the Florida Department of Revenue, even years after the estate is closed. You also have to settle any debts and pay taxes before distributing assets to beneficiaries. If you don’t follow these rules, you could be sued by the beneficiaries for causing them to lose money because of unpaid taxes. To avoid this, make sure to fulfill all tax obligations as a personal representative. When someone dies, their estate may owe federal income and gift taxes. The person in charge of handling the estate, called the personal representative (PR), is responsible for filing the deceased person’s tax returns and paying any taxes owed. If the PR doesn’t pay the taxes, they can be held personally liable for the debt. The government can also place a lien on the estate’s property to collect unpaid taxes. There are specific conditions that must be met for the PR to be held personally liable, including the PR having knowledge of the tax debt and the government filing a timely assessment or lawsuit against the PR. Payments made from the estate to certain creditors, like for funeral expenses or family allowances, don’t count as “debt” payments for tax purposes, but payments to other creditors, like state taxes or unsecured debts, do count. Overall, the PR can be held personally liable for unpaid taxes if they don’t fulfill their responsibilities. The Florida Probate Code has a process for dealing with a deceased person’s debts. This process includes notifying creditors and giving them a chance to file a claim. Some people might think that if the person in charge of the estate serves the IRS with a notice and the IRS doesn’t file a claim in time, then they wouldn’t have to pay the taxes. But that’s not true. The law still requires them to pay the tax debt. The process for claiming a deceased person’s unpaid taxes can be different for the government compared to other claims in probate court. Even if the government doesn’t file a claim in time, they can still try to collect the money owed. Some court cases say that if the government does file a claim, they have to follow the court’s decision about how much money they can collect. But the IRS disagrees with these cases and says that the person in charge of the deceased person’s estate still has to make sure the government’s claim is paid first. If they don’t, they could be personally responsible for paying the government back. If someone is in charge of a person’s estate and the estate might not have enough money to pay all its debts, they might have to go to court against the government to figure out who gets paid first. However, even if they win in court, they might still be personally responsible for paying any taxes owed. The government has a lot of power to collect money, and even Florida laws about protecting certain assets might not stop them. In Florida, there is an estate tax, but it’s currently not being collected for a few years. “The law in Florida requires the personal representative (PR) of an estate to file a federal estate tax return and a Florida Estate Tax Return if needed. If a federal estate tax return is not required, the PR can file an affidavit of no Florida estate tax due. The probate court cannot accept the PR’s final account until the Florida estate tax is paid. The PR can be held personally liable for the tax if they distribute assets to beneficiaries without paying the tax. The generation-skipping tax in Florida is usually paid by individuals and trustees, not the PR.” Intangible tax is a tax on certain types of intangible assets in Florida. If someone passes away and leaves intangible assets, the person in charge of their estate (the personal representative) needs to file the tax return and pay the tax. If the personal representative doesn’t do this, they could be in trouble and have to pay extra fees. They also need to provide certain documents to the Florida Department of Revenue. The homestead property tax exemption is only available to people who live on the property. If someone dies before January 1, the person in charge of their estate must tell the property appraiser so they don’t get in trouble for not paying property taxes. If the property is protected homestead, the person in charge of the estate doesn’t have to worry about it. But if they take care of the property, they have to make sure it’s safe. The process for handling the debts of the person who died only applies to debts they had before they died. It doesn’t apply to estate taxes, intangible taxes, or property taxes that weren’t paid after the person died. So the person in charge of the estate can’t use the state’s failure to claim unpaid taxes as a reason for not paying them. If the person in charge of a deceased person’s estate thinks they owe money to the Florida Department of Revenue, they have to let the department know by giving them a copy of a notice to creditors. It’s better to do this right away, instead of waiting for the department to find out on their own. The department has extra time to claim money for unpaid intangible taxes, even after the regular deadline for claims has passed. They can do this within 30 days of getting the inventory or within 30 days of getting new information about the estate’s taxes. In this article, we learned about the tax responsibilities of a personal representative (PR) in handling an estate. We also learned about ways a PR can be personally liable for not meeting these responsibilities. In the next article, we will learn about steps a PR can take to minimize their personal liability for these tax obligations. William C. Carroll and John âRandyâ Randolph are lawyers in West Palm Beach who specialize in estate planning and trust administration. They both have advanced degrees in law and are certified in wills, trusts, and estates, as well as tax law. They are respected in their field and have co-written an article with the help of a law clerk, Jennifer Gurevitz. This article is submitted on behalf of a section of lawyers that focuses on real property, probate, and trust law.
Source: https://www.floridabar.org/the-florida-bar-journal/minimizing-a-personal-representatives-personalliability-to-pay-taxes-part-i/
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