Dead or alive, Uncle Sam will gethis share. Even after you'redead, the IRS can audit past taxreturns. If you fudged deductions,underreported income, or goofed up,the surviving taxpayer whose signatureappears alongside yours on joint taxreturns and/or your estate could be heldaccountable for unpaid taxes, accruedinterest, and penalties.
American Way Woes
In most American households, eventhose in which both partners work fulltime, one spouse generally takes on theresponsibility of preparing the incometax returns. This often leaves the otherpartner in the dark when it comes to theinformation reported, the number ofdeductions made, and sometimes thelocation of this important information.
The absence of tax statements potentiallyleaves the surviving partnerdefenseless if they're ever faced with anaudit or are asked by the IRS to handover information to back up certaindeductions. Although there are tax professionalswho argue cases with the IRS,they don't come cheap—expect to paybetween $250 and $300 per hour. Thesefees can add up quickly, depleting assetsearmarked for the surviving partner'sfuture financial security.
Even if the surviving partner is neveraudited or challenged by the IRS, theywill still need ready access to previousincome tax returns; so too will anyoneappointed to handle estate matters. Tosettle the estate, it's necessary to filefinal federal, state, and estate taxreturns, as well as take care of a numberof other important financial issues.
Preparation is Key
Fortunately, you can make your family'slife easier with a very simple solution:organization. And with tax season barelybehind us, now's the perfect time toget things in order. Put all your incometax-related material in a safe placewhere your partner and appointedestate administrators can easily find it.Then, let these folks know the location.
You can also make things easier foryour loved ones by thinking ahead.Nobody likes to be left behind. But forthose family members who are, you canmake their lives a little better by keepingin mind the following 10 don'ts andapplying them to your life:
Beneficiary Book: A Family Information
For more information on this subject,visit www.active-insights.com. The Website allows visitors to download a freesix-page supplement to the tome . The supplement includes achecklist on how to settle an estate andprovides fill-in forms to list importantpeople, places, and things.
is a retired estate
and financial planner who has
helped families economically and
emotionally prepare for the
inevitable for more than 30 years.
He wrote The Beneficiary Book: A
Family Information Organizer (Active Insights;
1992), an information publication with fill-in-theanswer
worksheets that offers a convenient place
to record, organize, and centralize final testimonies.
For more information, call 800-222-9125
or visit www.active-insights.com.