If you are a trustee of someone’s estate, then you need to have the right tax identification number first. Then how to get a tax ID number for an estate? You can find out more in the following article.
About Getting an EIN for an Estate
It is important to understand how to get a tax ID number for an estate because you cannot process assets smoothly without it. Unfortunately, the social security number of the deceased party or individual cannot be used just like your own.
While this is the rule, there are also certain exceptions to the rule. The rule may not apply if the applying party is a spouse who is still alive. In addition, everything is left to the spouse either through a living trust or directly.
If this is the case, then the spouse can use their social security to gain access to the assets. Also, we can assume that these assets are your assets.
So, if we talk about EIN or ‘Employer Identification Number’, we can think of it as the social security ID number for the estate. EIN is required for quite a few things, one of which is in the process of setting up a bank account. The EIN is used by the relevant financial institution to provide information on the interest of the account until it is distributed to those who are entitled to receive the trust or estate.
About EIN and Taxpayer ID Number
The IRS is the agency that has the right to issue an EIN for a business. Businesses that already have an EIN can then file taxes. EIN is similar to a tax number, usually, both terms are still used depending on the case, or agency, so they can be used interchangeably. If someone says that they need a tax ID so they can use it for business needs, they usually tend to mean an EIN.
While a taxpayer ID number is more like an ITIN or ‘individual tax identification number’. ITIN is the number used for tax processing for foreigners, those who have not been able to obtain social security and spouses. ITIN also applies within the scope of an individual, if it is for a business entity, then it usually refers more to EIN.
What we can conclude is that TIN refers more to an IRS ID number that can be used to track the taxes of related parties. Individuals or businesses still need a TIN so that they can file and manage their taxes correctly and legally.
Meanwhile, EIN is only specifically issued by the IRS for businesses. To find out more about the uses of tax numbers and how to get a tax ID number for an estate, check out the following discussion.
What are the Uses of Taxpayer ID Numbers?
So, why do I need an ID number for tax, and how to get a tax ID number for an estate? All businesses do not have to take care of a tax number, especially for the sole proprietor of a business, it is not necessary to have a tax number. However, a tax number will be used as a condition of settling certain interests for a business.
So, even though tax numbers are not always necessary for all businesses, there will be many businesses that need this ID number. Some of the following uses are the reasons why many people need a tax number:
-
- Tax number needed for Keogh plans, some retirement programs may be tax-deferred, usually for self-employed individuals. In that case, you will need a tax number to process the program.
- Filing taxes separately, so that personal taxes can be separated from other taxes or business taxes, a tax number will be needed for that purpose. You as a business manager may be required to obtain a tax number. Without it, your business taxes may not be separated from your taxes. But this may depend on the business entity.
- Tax number for hiring employees. If you own a business and want to hire someone as an employee in your business, a tax number will be required for that.
- Certain industries must have a tax number. You may need a tax number because of the type of industry. One example of such an industry is a trucking company, which must pay certain taxes. Customs will have a lot to do with the trucking company’s operations, so they need to pay for those taxes. So, there are times when certain businesses have to pay certain categories of taxes other than income tax and that would require a tax ID number.
From the points above, we can see that a tax number is required for quite a variety of needs, especially for a business. Regardless of how the tax number is used, every business is advised to have a tax number because many things make it indispensable.
How to Obtain an EIN Number for an Estate
So, how to get a tax ID number for an estate? You can apply for an estate tax number through the IRS and this is the easiest way. You need to visit the official IRS website first, which is www.irs.gov. You don’t have to worry about the process because you will be guided until you get what you need and the process only takes a few minutes.
If you have successfully gone through every process on the website, then you can obtain an EIN that can be used for estate needs. How to get a tax ID number for an estate in other ways? There are other ways if you can’t use a computer, you can use a fax to send the application. You can use the number (859) 669-5760 to apply by fax.
However, most cases of applying for an estate tax number are done online and it is recommended that you use that method. When you process online, you will be guided by an online assistant provided by the IRS. You will be asked some important questions when applying for an estate tax number.
You don’t have to worry about how to apply for EIN for estate because the questions given by the online IRS assistant are quite easy to answer and are important for issuing an EIN. Even so, you need to be prepared for certain questions that can be quite confusing.
As a useful suggestion on how to get a tax ID number for an estate, you can print out a copy first. So, print out a copy of the SS-4 form first, and then try to fill out the application form completely. If there are no problems filling in the information on the form, then you no longer have to worry about applying online with the help of the Online Assistant.
Although we can predict from the beginning what will be found in the online estate tax number application system with the guidance of the Online Assistant, some things are different about how to get a tax ID number for an estate. The order of information or questions may be slightly different between the paper application form and what is in the Online Assistant.
But if before applying online, you fill out the paper form, you can get all the information earlier, making it easier when applying online with the IRS Online Assistant.
Some Common Questions When Applying with the IRS Online Assistant
When you apply for an estate tax number online using the online assistant, you will encounter quite a few questions. Here are some of the questions that usually arise there:
– Responsible Party
One of them is the question about the person in charge. When the Virtual Assistant asks this, you can input the name of the trustee or executor. To ensure the application of the estate tax number, the IRS needs information about who is responsible for paying the tax. They need this information to ensure that there is someone to turn to if the estate tax is not successfully paid. To complete the information, also provide the Social Security number of the executor.
– Name Of Executor
Another thing that needs to be answered is the name of the executor. You can find this question when applying EIN number for an estate. If applying for a trust, it will be quite different from what you have to answer. In the answer field, input the name of the executor, you can find out from the will or the like.
– Type Of Organization
You also need to tell about the type of organization for which you need to apply EIN. You can choose the “estate” option if your case is to get a number to access a distributed or probate estate based on will. Unlike if you are a trust administrator, you can select the “trust” option and need to explain about the type of trust.
– 645 Election
Another thing you will find when accessing the Virtual Assistant is about the 645 election and this may not need to be answered if you are administering an estate. This question is usually specific to trusts and relates to when to file trust tax returns.
You can consider two options, either keep the calendar year (ends on December 31) or end the tax year 12 months (after the related person dies). You can consider the non-calendar option if the trust cannot last beyond 2 years. If you are not sure which month option to use, think again about 645 election.
If you are unsure, you can use the December closing month option and you can change your options later accordingly. To determine things like this, there are times when you need the help of an accountant so you can get wise conclusions. About how to get a tax ID number for an estate, you may not need to consider the 645 election.
– Fiduciary Title
Another thing you need to pay attention to when applying for an estate tax number is fiduciary title. Questions about fiduciary title usually only arise for estate cases. So, when managing a trust, you might not encounter this question. There are at least 3 options for fiduciary title, here are some of them:
1. Administrator
Administrators are those who are appointed by the court for them to become responsible for the estate. Appointing an administrator is usually done because the appointed executor is unwilling or unable to serve. Another reason is that the will itself is not available.
2. Executor
Another title option is the executor, they are the party appointed according to what is in the will. Executor also means someone who is appointed by the court regarding the probate of the will.
3. Representative
Personal representatives are those who are nominated based on their will. However, they are not appointed based on a court decision, the reason being the unavailability of probate. In these cases, it is usually about small estates so basically there is no need for court supervision to handle it.
– Executor’s Name/ Irrevocable Trust Trustee
When filling this section, you can fill in the same answer as the previous ‘responsible party’ section. In both cases, it means that they have the responsibility of managing the assets including tax payments. They are responsible for the assets until the relevant estate is distributed to those who deserve it.
– Third Party Designee
How to get a tax ID number for an estate through the online assistant will also consider whether you are a third party or not. The IRS online assistant needs to know who is applying for the EIN. If you are the one applying for the EIN, as well as the one taking care of the tax payment or as the executor, then that means it is not a third-party designee.
Third-party designee means those who apply for an EIN so that it can be used by another party who is the executor. So, the executor can authorize certain third parties to access online services to obtain an EIN. Usually, a lawyer needs to obtain an EIN to help a client’s business, such a lawyer is one of the cases of a third-party designee.
Meanwhile, to formalize the application made by a third party, an executor’s signature is required. The signature is found on the SS-4 form and needs to be prepared before applying for the taxpayer ID number for estate online. Often, a separate letter explaining that the party is authorized is also required.
Such requirements are very important to note as the online assistant will ask the concerned party under the perjury penalty provisions. This is done to make sure that you are authorized and to avoid any attempts of abuse. Therefore, to smoothen the filing of tax numbers for third parties, don’t forget to prepare these requirements.
– Date Estate/Trust Created & Closing Month
The date the related party died is the date the estate was created while the month the person died is the closing month. To understand further, for example, suppose the related person died on May 13, 2024. The estate creation date for the case is May 13, 2024, while the closing month is May.
If you want to take care of a trust case, then the input about the date the trust was funded is also the closing month. The first date information that the IRS needs is about the date of death. While the closing month means the month on the date of death. Besides choosing the month of death, you can also choose December because it depends on the 645 election discussed earlier.
Those are more or less some of the things that will need to be conveyed to the virtual assistant. How to get a tax ID number for an estate? The IRS provides a virtual assistant and several other help features to make it easier for you to apply for an EIN or estate tax number. Later you will need to review the info again and submit it.
A final summary will appear and you need to check it, the summary contains all the information that you have inputted before.
To be sure, you need to double-check because there could be certain details that are wrong and need to be corrected. If you think everything is correct, then click the “Submit” option. Next, the EIN appears and you can use it for your estate needs. Usually, the process of getting an EIN is more or less like that but there can be glitches on the website so sometimes it is necessary to repeat the process from the beginning.
Conclusion
An EIN is needed for estate purposes, and this identification number is also needed when you want to set up a trust. How to get a tax ID number for an estate, to get an EIN or a tax number for an estate, you can access the IRS website as they can provide it for you. Some of the systems on EIN are similar to SSN or ‘Social Security Number’ as they are linked to the IRS database.
Whether it is for a trust or an estate, both require an EIN and there are certain procedural differences to obtain one. You can obtain the tax number for the estate easily through the IRS website. To be able to obtain it, you need to respond to some important questions about the estate.
Some of the questions may be quite confusing but you have to respond to them because the IRS will need that in issuing the tax number. To make it easier how to get a tax ID number for an estate, it is advisable to try filling out the SS-4 paper form. All the questions you have to answer when using the IRS virtual assistant are available on the form.
At least you can know what to prepare in response to what information is needed by the IRS to process the estate tax number. However, the order of questions that will be presented by the virtual assistant may be different compared to the paper version. About how to get a tax ID number for an estate, it is quite easy if you have prepared every information needed and you can get it for free.
But make sure you access the official IRS website to obtain an EIN quickly and for free. If you have completely answered the questions asked by the virtual assistant, there will be a summary of what information you have inputted.
After you have checked again, continue the process of submitting and the number will be processed automatically. You can use the number when you want to create a new account for estate needs. That’s all about how to get a tax ID number for an estate, hopefully, it can be useful for you.
