Federal Tax

What is the Federal Estate Tax?

What is the Federal Estate Tax? This question is asked very often by those who have estate plans as well as those who want to create an estate plan. The federal estate plan was first repealed on January 1, 2013 and then December 17, 2010 it was restored and applied back to January 1, 2010.

When a transfer of someone’s assets to their loved one is completed after they pass away, a federal estate tax is implemented on that transfer. The amount of federal estate tax that is owed is figured by calculating the fair market values of the combined values of assets owned by the decedent on the date that they passed away. After that amount is figured, the federal estate taxes are applied and the federal estate tax deductions that are allowed are subtracted.

What is the Federal Estate Tax and who has to pay?

Every United States citizen with an estate can be charged the federal estate tax but not all of these estates actually pay the tax. Why wouldn’t they all have to pay the federal estate tax? Each of the United States citizens get a coupon from the Internal Revenue Code which can be used on their bill for estate taxes.

The amount of the coupon changes per year. Back in 2009 it was worth $3,500,000. During the years of 2010 and 2011 the amount of the coupon was the same, valued at $5,000,000. The amount of the coupon went up in 2012 and 2013 respectively, valued at $5,120,000 and $5,250,000. So, for example, in the year of 2013 if an gross estate value minus the tax credits and deductions for the estate, weren’t over $5,250,000, the estate would be given to the decedent’s heirs without a federal estate tax being charged. As well as the federal estate tax, many of the states also charge state estate taxes or what are called inheritance taxes.

What if the Estate is Federally Taxable?

What is the Federal Estate Tax if it is taxable? The first that needs to happen, is that the estate will have to get a federal estate tax return filed with a Form 706. In the year of 2013, the Form 706 had a rule that it needed to be given to the IRS in a period of no more than nine months after the date of death of the decedent. The next thing to figure out is when your federal estate tax would be due. The answer to this is that the federal estate tax is due when you file the Form 706. An extension can be requested when you file the Form 706. The extension must be requested by filing a Form 4768. Although, by requesting an extension interest will be accrued.

Federal Tax

What to do if you have an estate?

If you or your family members have an estate, make sure to check on the gross value of the estate minus the coupon and the deductions. By keeping tabs on the total gross value at repeated intervals overtime, you can be prepared for a federal estate tax if it is to be charged to your estate.

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