What Does It Mean? – A New Federal Estate Tax Law
It is that time of the year when you are expected to file your 2010 IRS taxes. Do you still have unpaid IRS taxes from previous years? The solution is simple, but not easy if you are faced with a huge amount of unpaid IRS taxes.
You need to contact the IRS and make a payment arrangement to cover any unpaid back taxes owed. It might be helpful for you to go ahead and file your taxes for the year 2010 to find if you owe. That way, when you contact the IRS for unpaid back taxes, you can include current year debt with what you owe for previous years as well.
The traditional language used in dividing the assets into the two trusts is that the family trust is funded first with the maximum amount that could pass free of tax. The balance after funding the family trust is placed into the marital trust.
Now that the maximum amount that can pass free of tax is $5.0 million for federal purposes, for estates that are smaller than the $5.0 million, the entire amount of that person’s estate will go into the family trust, with nothing to go into the marital trust.
Not All Errors Qualify Some errors committed by taxpayers do not require the filing of an amended return. Below is a guide to some of the categories of errors and what taxpayers must do to rectify them. Typical Errors It is common for most taxpayers to make mathematical errors! The good news is that the IRS usually corrects the majority of these errors, and will notify the taxpayer of the fix. In this case, as when taxpayers forget to attach the correct forms (such as W-2 forms and Schedule Cs), no amendment is needed. Serious Errors (that raise red flags with the IRS) The IRS will ask taxpayers to file an amended return to correct errors if any of the following items were incorrectly reported: * Number of dependents (e.g. claiming 10 dependents when a taxpayer only has 1) * Filing status (e.g. marking single when taxpayer is married) * Total income (e.g. reporting gross wages that are different from the W-2 figure) * Deductions or credits (e.g. claiming a child tax credit when the taxpayer has no children)
You might even have a return coming back from the year 2010. When this happens you can apply any amount that you will receive in a refund to what you owe in unpaid taxes.
In addition to the lifetime federal estate tax exemption amount increasing to $5.0 million, the lifetime gift tax exemption and the lifetime generation skipping tax exemption also increases to $5.0 million. This means that gifts that are in excess of the annual limit of $13,000 can be made without tax. This is true on gifts to the grandchildren, as well. This creates many more opportunities to give money or other assets to your children or grandchildren without creating a tax.
With all of these opportunities, the one potential problem is that this new law is a two year law. By the end of that time, Congress needs to do something such as to abolish the federal estate tax, or to set it at the current number more permanently. If it fails to do so, we may end up back at the $1.0 million lifetime exemption amount.
Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit . Offers Debt Consolidation and debt settlement programs.