IRS Form 56 Explained
IRS Form 56 Explained
Fiduciary relationships allow one person to be responsible for the assets of another, and IRS form 56 is utilized to inform the IRS of the creation or termination of this relationship under section 6903.
TABLE OF CONTENTS
Key Takeaways:
- The IRS tax form 56 is used to inform the IRS that there has been a change in a fiduciary relationship, one in which someone is responsible for the assets of someone else.
- Trustees can file form 56 when they gain or lose responsibility over a decedent or a decedent’s estate.
- Individuals who are establishing a fiduciary relationship with a decedent must provide all information about the decedent. This must include their SSN or ITIN that is shown on his or her final Form 1040 if the fiduciary is acting on behalf of the decedent, or the information from the final Form 706 if they are acting on behalf of the decedent’s estate, including the suite, room, or any other relevant unit numbers in the street address.
What Is IRS Tax Form 56?
The IRS tax form 56 is used to file with the IRS when there is a change in a fiduciary relationship, one in which someone is responsible for the assets of someone else. Tax form 56 allows taxpayers to provide information to the IRS concerning fiduciary relationship changes such as the creation or termination of this relationship. Taxpayers must file form 56 to inform federal agencies like the IRS and creditors that they should send all mail regarding the estate to the fiduciary.
The main goal of form 56 is to ensure that the fiduciary or trustee is established as responsible for the accounts of an estate.
Key Definitions
Fiduciary
A fiduciary is someone who acts on behalf of someone else to manage their property or money. A fiduciary can take on the duties, privileges, rights, and powers of the entity for which they are responsible.
"Person"
In the context of tax form 56, a person is an association, company, corporation, estate, individual, partnership, or trust.
Decedent's Estate
A decedent’s estate describes the taxable entity that is separate from the decedent at the time of their death. Essentially, it is the assets left behind by someone who passed away.
Who Must File Form 56?
There are two main groups of people who must file form 56 when they submit their tax returns: those involved with the estate, and those involved with bankruptcy.
Estate
Administrators, guardians, or trustees for a decedent’s estate must file form 56. In the case that there are multiple people who are responsible for an estate, each of them must file their own form 56. If there are multiple estates involved in the fiduciary relationship, there must also be form 56 filed for every estate that a trustee plans to become responsible for.
Bankruptcy
Bankruptcy assignees, trustees, and receivers can also submit form 56 while including the date on which the court assigned the assets. In this circumstance, form 56 ensures that the trustee is qualified and capable of managing the debtor’s assets and can file on behalf of the bankrupt company or individual.
How To File Form 56
There are three main ways a taxpayer can access IRS form 56: it can be found as a PDF online, the taxpayer can get a copy from a tax professional, or they can get a copy directly from the IRS. The fiduciary or trustee is responsible for submitting form 56 directly to the IRS in a timely manner after their fiduciary duties have been established. The instructions for filling out IRS form 56 can be found on the IRS website and outlines an overview of the process of how to use form 56. There are also other articles and content online that can provide a further description of how to file form 56.
The first part of form 56 to be filled out involves information about the decedent, including their name, SSN or ITIN that is shown on his or her final Form 1040 if you are acting on behalf of the decedent, or the information from the final Form 706 if you are acting on behalf of the decedent’s estate, including the suite, room, or any other relevant unit numbers in the street address.
Lines 1a to 1f allow the fiduciary to check the boxes regarding the specific roles they will take on in regard to the decedent or their estate.
Line 2 of form 56 includes a section to specify the date of death as well as the date of appointment to transfer assets.
Lines 3 and 4 outline all of the other tax forms and documents that will be submitted with tax Form 56 at the time of filing.
The fiduciary will also have to specify a title for their role when they file tax form 56 from the following options: assignee, conservative, executor, guardian, personal representative, receiver, or trustee.
If you need help navigating the details of filing your tax return or filling out IRS form 56, the tax pros at Ideal Tax can give you the confidence that your taxes are done right and will give you the greatest tax advantage and benefits possible.
