Do i need an ein for a small estate

The Internal Revenue Service requires estates to have their own tax identification numbers because an individual and his estate become two separate tax entities after death. They can’t share his Social Security number so the estate needs an identifying number of its own until it’s settled and probate closes.

The Probate Estate

The probate process moves the deceased’s property out of his name and into the names of his beneficiaries. A complicated estate can be tied up in probate for a quite a while, so the transfer from the deceased to beneficiaries usually involves a step in between -- the estate takes ownership of the property until it can be passed to beneficiaries. This includes cash the deceased might have had on hand. His personal bank accounts typically are closed and the money transferred into an account in the name of the estate. When the estate retains ownership of money or property, even for a short period of time, it needs its own tax ID number with the IRS.

The Deceased’s Social Security Number

Some tax returns must be filed in the deceased’s name, not that of the estate. If he worked up until the date of his death, there may be an outstanding paycheck due him, which must be reported to the IRS on his final tax return. The same applies if he has an investment that earned interest before his death, but not paid until after he died. The executor of his estate is responsible for filing a return and reporting any income he earned or took in from January 1 until his date of death. She would use his Social Security number on this return. If he failed to file returns in previous years, these must be filed after his death as well using his Social Security number.

The Estate’s Tax ID Number

When an estate earns income in excess of $600 after the date of death, it must file its own income tax return. \This income is reported to the IRS under the estate’s tax ID number or EIN, also called an employer identification number. These earnings go on IRS Form 1041 -- an estate income tax return -- not a 1040. Very large estates also may be liable for federal estate taxes and a tax ID number is necessary for this filing as well. But as of 2015, only estates worth more than $5.43 million are subject to estate tax. If the deceased owned a business, this requires yet another tax ID number after his death so wages can be paid to employees and income can be reported.

Read More: How to Look Up an Estate Tax ID Number

Getting a Tax ID Number

Getting an EIN for the estate usually is easier than figuring out why and when it needs one. It’s a simple matter of completing Form SS-4 and submitting it to the IRS, and the IRS allows you to do this online. If you’d rather do things the good old-fashioned way, get a copy of the form at your local post office or Social Security office and mail it in. But if you take this approach, you’ll have to wait four weeks or so to get the number back so you can begin opening estate accounts and seeing to the business of probate. You also can call the IRS and receive a number immediately, but even if you apply online or on the phone, you must mail in a hard copy of Form SS-4 as well.

References

Writer Bio

Beverly Bird is a practicing paralegal who has been writing professionally on legal subjects for over 30 years. She specializes in family law and estate law and has mediated family custody issues.

Hi, you’re going to learn today why you need an employer identification number for the probate estate. Now employer identification number is a bit of a mouthful so I’m going to abbreviate it by calling it an EIN.

An EIN is issued by the Internal Revenue Service. I’m telling you what I tell every client I have ever had who asked to do probate once you have gotten your letters, get yourself an accountant.

I don’t care who your accountant is use anybody that you want but get an accountant because it’s not your personal expense, it’s an expense of the estate and even simple probate estates may have some amount of tax work that needs to be done. So rather than waiting for the end when you have to file taxes work to find out if you have to file taxes get somebody at the beginning. The accountant is going to simplify your life and you can tell your accountant “I’ve now gotten my letters in probate I need an EIN the accountant will help you to fill it out”, they will submit it for you they’ll get you the EIN no muss no fuss. It should be easy for you to do.

The reason you need an EIN is that you are going to have to and I want to emphasize this you have to open an account in the name of the probate estate.

If you’re selling real estate and you’re going to get cash from the sale if you’ve got an existing bank account or accounts if there are stocks bonds mutual funds all the things that are typically in a state. If any of this is ever going to be turned into cash and 99.99% of the time that does happen you will need a bank account that says John Smith executor of the estate of Doris Smith. In other words, you’ve got to have an account in the name of the estate.

There is not a bank in America that will open up the account in the estate’s name if you cannot provide them with a certified copy of your letters and EIN.

They are absolutely mandatory now for the very few of you who are not going to follow my advice I’ll tell you how to do it yourself and then when you do it and you find out how much fun it is to deal with the IRS hopefully you’ll reconsider and get an accountant. For the rest of the probate process to get an EIN you have to fill out form SS-4  now you can do that online at the IRS’ website, you can download the form fill it out, and then fax it in.I believe there’s even an option to do it by old snail mail if you want to but you will have to submit this in order to get the EIN to understand you do not want to wait you do not want to be closing on the sale of the house that’s in the estate to have the escrow company asked you for an EIN that you cannot provide so once your letters are issued one of the very first things you should be doing is getting that EIN.

If you need to do probate or have questions about completing probate, do not hesitate to contact our office today!

What happens if a will is not filed in Illinois?

How do I open an estate bank account in Ohio?

How long do you have to file probate after death in Illinois?