When a person dies, all their assets will automatically become part of their estate. This means that any income generated through these assets will also automatically become part of that same entity. For instance, bonds, mutual funds, savings accounts, music royalties, stocks, all of it will be integrated into that very same entity.
That being said, it is vital that the descendant file an estate income tax return. It is a requirement if the estate is able to generate an amount exceeding $600 as its annual gross income. This article delves into the specific requirements that must be met by the beneficiaries of the estate. It also explains how one can apply for an EIN.
Understanding the Estate Tax Process
It is vital that readers understand the tax process for estates. For instance, not many people realize that there are actually two kinds of estate taxes. The first one focuses on the transfer of assets from the original owner to their beneficiaries and heirs. This is commonly known as the estate tax. The second tax levied on the estates is on the income that is generated by its assets, also known as the income tax.
Since the original owner and their estate are considered to be separate entities which are taxable, the heirs will need to acquire the necessary tax documents for the latter. In particular, you will need to acquire an EIN.
Applying for an EIN
Before you apply for an Estate EIN, you should know that this task cannot be performed by anyone unless they are the administrator or executor of the original owner’s estate. This is determined by the will of the owner or appointed by the court. On top of that, you will also need to prepare supplementary documents such as the original owner’s personal tax identification number as well as their Social Security number. Without these things, your application for an EIN will most likely be denied.
Now, some people are intimidated by the prospect of applying for an EIN because they believe that it entails a cumbersome and tasking process. On the contrary, it is actually rather straightforward, as long as you follow the steps closely. It is also worth mentioning that there is more than one way to get an EIN. So, make sure that you check the options below to see which would be more convenient for you.
- By mail – First, you need to get a copy of the IRS Form SS-4. You can get it from your local IRS field agency branch. Alternatively, they are also available for download at the official IRS website. Make sure to fill in all the necessary information including the original owner’s Social Security number. Do not forget to specify the purpose of your application. Once you have done all of that, sign the form and mail it back to the IRS office.
- By Phone – You can also call the IRS hotline. The representative will then ask you a series of questions pertaining to your application and fill up the EIN form accordingly.
This article presented a few basic things you must know about EIN for Estates. Keep them in mind and make sure to follow the directions closely.