Understanding tax requirements can be pretty difficult especially when you are handling someone else’s responsibilities. If you find yourself taking on fiduciary duties for a loved one, client, or estate, the paperwork is an important aspect that you will need to familiarize yourself with. One such document is called Form 56. This keeps everything between you and the IRS very clear- but knowing how to approach it really matters.
What is IRS form 56?
IRS Form 56, also called Notice Concerning Fiduciary Relationship, is a form that notifies the IRS that you are acting as a trustee. Simply put, a fiduciary person is one who deals with financial or legal affairs on behalf of someone else, like an executor of an estate.
This form keeps the IRS aware that you, as a person, hold the responsibility for managing the taxes of another person who cannot handle them or that you are legally charged with managing the affairs of that person.
When do you need to file form 56?
You must complete Form 56 whenever you take up a fiduciary position or when you terminate one, for example:
- Executor of an estate: In case you are handling the estate of a deceased individual, you must handle his final tax filings. Then, you will have to file Form 56.
- Conservatorship: If you are appointed as a conservator for someone who cannot handle their own financial matters as, say, as a result of being sick, then the form is required.
- Bankruptcy trustee: If you take care of someone’s finances while dealing with a bankruptcy filing, then such refers to filing with the IRS.
It is your responsibility to notify the IRS within 90 days of assuming or relinquishing fiduciary status.
How to fill out form 56 step by step
Form 56 might look overwhelming at first, but it is manageable if you follow the steps below.
Part I: Identification
In this section, you will need to provide specific information about you and the person for whom you act as fiduciary. You have to provide:
- All the details which include the name, address, and the Social Security or EIN of the person you are representing.Â
- Your name and address is also required.
Section A: Authority
This part explains how you became a fiduciary. Check the boxes that apply to your situation, such as:
- Court appointment for an estate (with or without a will).
- Appointment as a guardian or conservator.
- Acting under a trust agreement.
- Bankruptcy proceedings.
You may also need to enter dates related to your appointment or the person’s passing.
Section B: Nature of liability and tax notices
Here, you specify what type of taxes you are handling (e.g., income, estate, or excise tax). You will also have to identify the tax forms that are involved and indicate if your authority covers specific years or periods.
Section II: Revocation or Termination
When you are terminating your fiduciary role, this section is where you can notify the IRS.
- Explain why you are terminating or revoking the fiduciary relationship.Â
- State whether there is another fiduciary taking over. Give the person’s information.Â
Part III: Court and Administrative Proceedings
This section should only be included when there are court appearances as a result of the fiduciary act. It should contain the following:
- Name and address of the court.Â
- Date and time of the proceedings.
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Part IV: Signature
Sign and date the form to certify that the information you provided is accurate. If you are filing on behalf of an organization, include your title.
Where to file IRS form 56
You cannot file Form 56 electronically. You must mail it to the IRS Service Center that handles tax returns for the person you are representing. The IRS website has a list of service center addresses, so check the correct one for your case.
Common mistakes to avoid when filing form 56
- Missing deadlines: You are required to file Form 56 within a maximum 90-day period after taking on the fiduciary role. You may be subjected to penalties on the failure to comply with this requirement.
- Incomplete information: Confirm your entries – names, Social Security Numbers, and tax years.
- Forget to revoke previous notices: If you are no longer acting as fiduciary, be sure to file to end the relationship correctly.
What happens if you do not file form 56?
Failure to file Form 56 can create problems with the IRS, such as notices about taxes being overdue or penalties for non-compliance. As always, it is advisable to submit this form without unnecessary delay at the earliest opportunity.
This guide has everything on Form 56: With these instructions, you can feel at ease that you are managing fiduciary duties and complying with IRS requirements.
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