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IRS Tax Transcripts

New York, NY |

The sole beneficiary of an inter vivos trust dies without a will. The personal representative is given copies of the beneficiary's K-1s by the trustee. Beneficiary's estate is the remainer beneficiary of the trust.
As it turns out the beneficiary did not file her tax returns for a number of years so the personal representative went to the IRS office and got the beneficiary's IRS tax transcripts. For the last six years, the the transcripts are blank. In other words, no income is shown on the transcripts and the beneficiary did receive income from the trust. The personal representative believes that the trustee prepared the trust tax returns but did not file them. Could there be any other explanation for these transcripts showing no reported income? SS is correctly recorded.

The beneficiary did not file a 1040 for a number of years. Even so the personal representative was surprised to not see any reported income on the IRS transcripts. The beneficiary's sole source of income came form the trust.

Attorney Answers 3


  1. Best answer

    The only real answer in this case is that no returns were filed. The fact that the account transcripts don't show anything also says that you're lucky right now because the IRS hasn't prepared substitutes for return for the years in question. That means that the trustee and the personal representative now have the ability to come in from the cold first and file the returns before the IRS comes looking for any unpaid taxes.

    However, in addition to the six years for which you say transcripts were requested, I would suggest going further back to see if you can identify the last time a tax return was filed. The reason for that is just as a precaution; while the IRS generally limits its demand for returns from nonfilers to the last 6 years, under appropriate circumstances (e.g., suggestions of fraud or hanky-panky with a trust) the IRS may go back further.

    Also, make sure you're getting copies of the two basic transcripts the IRS makes available: the "account transcript" and the "wage and income transcript" - the first shows all of the activity on the account starting with the filing of a return (if any) and any subsequent activity, such as examinations for unreported income, collection notices, and the like. The second shows all of the information that was reported by third parties to the IRS, such as K-1s, Forms 1099, W2s, and the like.

    Good luck.

    www.newyorktaxcounsel.com

    My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not constitute an attorney/client relationship or an offer to form such a relationship. This disclaimer is intended to be fully compliant with the requirements of Treasury Department Circular 230 and the terms thereof are fully incorporated by reference. If you wish to consult with me please contact me at dwatchley@newyorktaxcounsel or visit my website at www.newyorktaxcounsel.com


  2. It is not entirely clear to me whether you mean that the individual did not file a tax return or the trustee of the trust did not...or both. I can see where the trustee might have passed all of the income through to the beneficiary, and the trust would then reflect zero income.

    The Personal Representative is going to need to work with an attorney on this to determine how best to correct the non-filings.

    James Frederick

    *** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.


  3. No-I think your thinking is correct.
    Now the PR and Trustee will have to file the back returns in order to finalize both estates.

    The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.

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