When New York readers think of the various reasons why a person might need a tax attorney, an audit from Internal Revenue Service might top the list. However, effective tax planning requires more than defensive approach. A tax attorney might agree that a proactive approach to the issue of tax liability might yield better results.
One area that could benefit from advance planning is the issue of inheritances. Readers likely know that an inheritance typical triggers tax liability for the beneficiaries. Yet a recent article highlights a lesser-known problem: As many as ten percent of estates might have unresolved — and ongoing — tax liabilities or issues.
What that means is that a beneficiary may have to step in the shoes of the former property owner and deal directly with the IRS. The beneficiary’s receipt of assets or funds from the estate might be delayed until the state or federal tax authority has released any liens.
Another potential unexpected surprise might be the discovery of unreported funds or assets. Since that income may never have been reported to the IRS in the first place, the beneficiary may have a tax controversy or dispute over this issue brewing, as well.
Finally, even the relatively straightforward issue of paying estate tax may surprise some individuals. Although federal estate liability is triggered at the relatively high threshold of $5.25 million, state tax liability may begin at much lower amounts. When the estate owned assets in different forms, such as personal property, securities, or even business property, the tax consequences of each form of property might be different — and result in beneficiaries receiving unequal amounts.
For all of these issues, a tax attorney, versed in the latest legal tax code developments, might offer guidance regarding current tax obligations.